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Exploring transactionsbetween supply chain entities: a psychological study of

buyer-supplier relationships.

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Exploring Transactions Between Supply Chain Entities:

A Psychological Study of Buyer- Supplier Relationships

by

Samir Suresh Dani

A Doctoral Thesis '. - - .- - _.- ._.

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Dedicated to my parents

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my wife Shilpa

and

my daughter Harshita

Abstract

The research presented in this thesis has focussed on exploring buyer- supplier

relationships from a human perspective. To date, researchers across the globe have

studied buyer-supplier relationships and endeavoured to find means to try to make

them better. This has led to many new relationship development programmes initiated

by companies and new concepts introduced by academics for the betterment of buyer

supplier relationships. The focus of academics has been in trying to study buyer

supplier relationships from various factors, viz. power, opportunistic behaviour,

unethical behaviour, partnerships, collaborations, etc. All these endeavours have

focussed on using technology or business processes in order to streamline operations

and create environments, which would foster partnerships or collaborations. One

aspect not usually given prominence in these studies has been the presence of humans

in the relationship as representatives of the transacting companies. Giving this more

focus, the researcher feels that organisational culture plays a very strong role in the

way organisations operate, and when two organisations transact with each other the

individual culture is bound to play a role in the way the transaction is conducted. The

individual culture of the organisation also depends upon the humans in the

organisation.

Since, the focus of the research was on exploring the buyer-supplier relationships

from a human perspective, the research sought this perspective from people working

in purchasing or sales functions in different companies. The information was collected

by conducting "Phenomenological Interviews" with focus on "critical incidents"

affecting the relationship. The information was analysed for themes which led to the

need to study buyer-supplier relationships from two perspectives: 1) game-like

behaviour, 2) discretion, humans have in the relationship. The presence of game-like

behaviour and humans in the relationship led the researcher to study the concepts of

"Transactional Analysis" and check for the feasibility to transfer the concepts from a

therapeutic setting to buyer- supplier relationships.

The research has been successful in exploring issues affecting buyer-supplier

relationships. A methodology for aligning supply chains by taking into account

human issues has been proposed. The methodology comprises a relationship

framework that is used for studying buyer-supplier relationships on a macro- level

based on the levels of satisfaction the entities have with each other. Since high levels

of dissatisfaction lead to various change- inducing transactions or game-like

behaviour between the entities, the framework identifies the status of the relationship,

and can be used to gauge what's going to happen to it, once the transaction is over.

The concepts of Transactional Analysis and the tools associated with it, viz. Drama

Triangle analysis and structural modelling are useful in studying the dynamics of the

transactions from the human perspective and also from a psychological perspective.

Keywords: Buyer- supplier relationships, Transactional Analysis, supply chain relationships

11

Acknowledgement

This thesis has been a part of my life for some time now, and it has thus affected many people surrounding me. I thus take this opportunity to thank everybody who helped me directly and indirectly during the completion of my PhD.

I would like to thank my supervisor, Prof. Neil Burns who has not only been a good PhD guide but also a very good friend, with whom I could share most of my problems- both academic and personal, which was a great help when times were not right. He has introduced me to various new concepts and has given me the necessary motivation to complete this PhD.

I would like to thank Or. Stephen Newman, who has been my Director of Research, for his help during the yearly assessments. I would also like to thank Prof. Dennis Kehoe, Or. Hossein Sharifi, Or. Nick Boughton, from Liverpool University, who were a great help for this research. The discussions I had with them during the implementation of the research project on "Supply- Chain Alignment" provided me the necessary feedback and suggestions for my research.

The office that I shared with the other researchers from the "Manufacturing Organisation" group in the Wolfson School of Mechanical and Manufacturing, Loughborough University was like a second home. I really had a good time with Avinash, Danny, Biao, Saud and Sarah. There were many people from the department who made my life comfortable during the duration of this research, and I would like to thank all of them for their help.

Living abroad away from home is difficult, but my friends in Loughborough and Leicester have been a great help to me during this time. I would like to thank them for the good times I have had.

Finally, I would like to end on a personal note. I would like to thank my parents, who have been a strong guiding force in my life and who have helped me reach this stage in my career. I would also like to thank my in laws for the support they have rendered on to me during the duration of this research.

Lastly, a very big thank you to my wife Shilpa and daughter Harshita who have supported me throughout and have sustained all my tantrums patiently.

111

Table Of Contents

Abstract Acknowledgements Table Of Contents List of Figures

Chapter One- Introduction

Aim

1.1 Introduction 1.2 Research Context 1.3 Research Approach 1.4 Research Objectives 1.5 Thesis Structure 1.6 Summary

Chapter Two- Review of the Literature

Aim

2.1 Introduction 2.2 Supply Chain Management 2.3 Supply Chain Alignment 2.4 Supply Chain Relationships

2.4. I Transaction Cost Economics 2.4.2 Relational Contracting theory 2.4.3 Purchasing literature 2.4.4 Collaborations 2.4.5 Partnerships

2.5 Issues affecting supply chain relationships 2.5.1 Power

2.5.l.l Facets of Power 2.5.2 Exit- Voice 2.5.3 Opportunistic Behaviour 2.5.4 Unethical Behaviour 2.5.5 Trust

2.6 The Human Perspective 2.7 Research Focus 2.8 Summary .

Chapter Three- Research Approach

Aim

3. I Epistemology 3.1.1 Positivism

IV

I

iii iv vii

1

1

1 2 5 5 7 8

9

9

9 la 12 15 16 18 18 19 20 23 23 28 30 32 34 37 38 41 43

44

44

44 44

3.1.2 Interpretivism 3.1.3 Positivism Vs Interpretivism 3.1.4 Epistemology and research methods

3.2 Research Design 3.2.1 The Qualitative- Quantitative divide 3.2.2 Epistemology, methods and research objectives

3.3 Research Approach 3.3.1 Phenomenological inquiry 3.3.2 Sampling issues 3.3.3 Critical Incidents Technique 3.3.4 Early Steps in analysis

3.3.4.1 Contact Summary Sheet 3.3.4.2 Document Summary Form

3.3.5 Issues of Validity 3.4 Interview Synopsis 3.5 Analysis ofthe data 3.6 Discussion

3.6.1 The new Themes 3.7 Summary

Chapter Four- Psychological Implications

Aim

4.1 Introduction 4.2 Games

4.2.1 Why study Games? 4.2.2 Game Theory 4.2.3 Is there something else happening in the relationship?

4.3 Transactional Analysis (TA) - An Introduction 4.3.1 The development Of Transactional Analysis 4.3.2 Transactional Analysis

4.3.2.1 Life Positions 4.3.2.2 Script 4.3.2.3 Ego-states 4.3.2.4 Time structuring

4.3.3 Transactional Analysis Games 4.3.3.1 Why people play games

4.3.4 Game analysis 4.3.4.1 Game Formula 4.3.4.2 Karpman Drama Triangle

4.4 Transactional Analysis in Organisational settings 4.5 Transactional analysis of Buyer-Supplier Games 4.6 Individual or Organisational Games 4.7 Limitations and assumptions for using Transactional analysis 4.8 Research Questions 4.9 Summary

v

45 46 48 49 50 51 53 53 55 56 57 58 58 59 60 61 64 65 71

72

72

72 72 73 75 77 79 79 80 83 85 86 88 91 93 95 95 96 98 100 103 104 106 107

Chapter Five- Research Direction

Aim

5.1 Introduction 5.2 Development of the Concept map 5.3 Where does this research fit in? 5.4 The Research Fit 5.5 Summary

Chapter Six- Making sense of the Research

Aim

6.1 Introduction 6.2 Initial Proposed Methodology

6.2.1 Using the methodology 6.3 The Cases

6.3.1 Transaction I: "Got You" 6.3.2 Transaction 2: "Not Again" 6.3.3 Transaction 3: you may be powerful, but ... 6.3.4 Transaction 4 : Electronic reverse Auctions- The Loss Leader 6.3.5 Transaction 5: searching for a quality problem 6.3.6 Transaction 6: "We can Play the game too"

6.4 Discussion 6.5 Refining the Methodology 6.6 Conclusion 6.7 Summary

Chapter Seven- The Research Experience

Aim

7.1 Research Contribution 7.2 Limitations of the research 7.3 Could it have been done better - An After thought? 7.4 New Knowledge generated 7.5 Conclusions and future work 7.6 Summary

References

Appendix 1- Document Summary Sheet Appendix 2- Contact Summary Sheet Appendix 3- Journal Paper Appendix 4- Author's Publications

VI

108

108

108 109 lJ4 lJ7 130

131

131

131 132 134 136 136 141 144 147 151 155 159 162 165 165

166

166

166 169 169 171 172 173

174

185 191 196 207

List of Figures

Figure 1.1: Structure of the Thesis

Figure 2.1: Supply chain management as a type of relationship

Figure 2.2: The principle of strategic alignment

Figure 2.3: Partnership as a type of relationship

Figure 2.4: The range of supplier relationships

Figure 2.5: Types of relationships

Figure 2.6: The Exchange Power matrix

Figure 2.7: Types of Power in a Buyer- Supplier Relationship

Figure 2.8: Porter's Strategy for Buyers and Suppliers

Figure 3.1: Positivist and Interpretivist epistemologies

Figure 3.2: Comparison between Positivist and Interpretivist epistemologies

Figure 3.3: A model of research design

Figure 3.4: key choices of research design

Figure 3.5: Strengths and Weakness of qualitative research

Figure 4.1: Life Position Corral

Figure 4.2: The Ego state model

Figure 4.3: Complementary and Crossed transactions

Figure 4.4: The main concepts of Transactional Analysis

Figure 4.5: The Con-Gimmick Formula

Figure 4.6: The Drama Triangle

Figure 5.1: Patterns of communication

Figure 5.2: Concept map for depicting psychological behaviour between supply chain

entities

Figure 5.3: Demand network Alignment

Figure 5.4: Dynamics of the transactions and relationship between supply chain

entities.

Figure 5.5: The Relationship Framework

Figure 5.6: The movements (quadrant- hopping)

vu

Figure 6.1: Initial proposed methodology

Figure 6.2: Got you

Figure 6.3 Drama Triangle analysis of transaction 1

Figure 6.4: Not Again

Figure 6.5 : you may be powerful, but. ....... .


Figure 6.7: The Loss leader


Figure 6.9: searching for a quality problem

Figure 6.10: We can play the game too


Figure 6.12 methodology for studying buyer-supplier relationships

V1I1

Introduction

Chapter One

Introduction

Aim: The aim of this chapter is to present to the reader a background about the research

project. the reasons for undertaking the research. and a brief idea of what to expect in the

thesis.

1.1 Introduction

The research was initiated as a joint collaborative initiative between Loughborough

University and Liverpool University funded by the EPSRC. The aim of the research project

was to investigate the inter-relationship and alignment of supply and demand networks

from three perspectives namely the physical/operational. the information/knowledge

systems and the relationships/behaviour that take place between collaborating partners.

Through case studies carried out in the automotive, machine tool and food manufacturing

sectors, models of the interactions of the demand networks operations, variables and their

alignment issues have been proposed and tested. These models have been combined into a

DNA like representation of an intermeshing network of two strands each contributing to

the quality of the supply and demand network system.

The research associated with understanding the alignment issues in supply networks

through the perspectives of relationships and behaviours that take place between the

collaborating partners was conducted at Loughborough University by the researcher. This

PhD thesis presents the relationship and behavioural issues between buyers and suppliers

in supply networks. This research was combined with the research done at Liverpool

University to form the DNA model as described above. Although the thesis presents some

information about the DNA model and its constituents, the primary focus of the thesis is to

only present the relationship issues and the process undertaken to arrive at the research

objectives and subsequently the suggestion of a new perspective to study the relationships

between buyers and suppliers.

1

Introduction

1.2 Research Context

''It's another example of the multiple CEO's showing great sympathy for the farmers'

plight, yet purchasing executives further down the supermarket teams seem to be making

their own rules." (Anonymous, 2003)

"Some of the more junior buyers seem to think, for example, we can magic up one million

extra chickens in a moment. The poultry industry is not like that." (Anonymous, 2003)

" .. from farmyard to kitchen, a few giant supermarket chains increasingly dominate our

lives.' (Anonymous, 2003)

These quotes depict that the relationships between buyers and suppliers are subjected to

many factors viz. power, trust, human behaviour, dominance, etc. and in order to study

these relationships all these factors have to be looked at in a holistic perspective.

Also, in research conducted by Craig Carter (1998) to study Ethical issues in Global

buyer- supplier relationships, he found that unethical practices conducted by both buyers

and suppliers strained these already complex relationships further leading to trust

deterioration and relationship break-up. He defined unethical activities as the specific set

of actions taken within the buyer-supplier relationship that are considered unacceptable,

inappropriate, or irresponsible by purchasing managers ••

As per the report, an analysis of the survey data from buying firms indicated that unethical

activities of buyers fell into two broad categories:

a) Deceitful Practices: This first category consisted ofbehaviors involving deception, and

included survey questions addressing the following activities:

-Purposefully misleading a salesperson in a negotiation

-Exaggerating the seriousness of a problem to gain concessions

-Using obscure contract terms to gain an advantage over suppliers

-Inventing (making up) a second source of supply to gain competitive advantage.

2

Introduction

b) Subtle Practices: The second category of unethical actions included somewhat more

subtle activities such as:

• Writing specifications that favor a particular supplier

·Allowing personalities of suppliers to impact decisions

·Giving preference to suppliers preferred by top management.

If these activities are studied it is once more evident that human behaviour is a major factor

in these relationships. The behaviour shown by individual human beings is very important

to the relationship. It also raises the question whether it is only the human behaviour

affecting these relationships or is the organisation as a whole also showing some behaviour

that is leading to relationship problems. Another issue that arises is the reason for that

particular human or organisational behaviour.

The following is a quote, which depicts another dynamic of the buyer- supplier

relationship. This process is the gaming approach and is relevant to the issue of what

exactly happens between buyers and suppliers during a transaction.

"It really doesn't matter if an OEM (original equipment manufacturer) needs cost cuts

immediately, he asserts. Because the arbitrary approach is a gaming approach and

suppliers will learn to play faster than the OEM. There are more suppliers to gang up on

automakers and the program will become adversarial. Then everybody loses." (Kobe,

2001)

Some of the perspectives presented by suppliers against supermarkets in the competition

commission report: Supermarkets: A report on the supply of groceries from multiple stores

in the United Kingdom published in 2000 are as follows. These perspectives again lend

credibility to the fact that power is a very important factor in buyer- supplier relationships,

and this power is manifested either by the organisation itself, or by the individual human

beings representing the organisation.

"The power of the multiples, and especially of young (c.25/28) buyers, without experience,

is frightening. [They have} the power to dictate prices and margins, display or not,

allocate space and threaten covertly. It's why we would never allow more than 15 per cent

of turnover to be supplied to multiples . ..

3

Introduction

talk about partnerships, but these do not exist, and they ruthlessly erode suppliers'

margins with no consideration oJ the damage they are doing to that company or its

employees. Multiples switch their buyers around every six to twelve months in order that

relationships and loyalty to suppliers can be avoided. The new buyer is given carte

blanche to de-list suppliers, who are Jrequently treated with complete contempt. "

..... many oJ our individual members are extremely reluctant, or reJuse point blank, to

comment on specific cases. Many oJ these organisations have 40, 50, 60 or even 70 per

cent oJtheir sales with a multiple. The resultant power that the multiples have is huge. This

power is often rested in the hands oJ a small buying team, often young, who are changed at

short notice routinely. This makes it extremely difficult to maintain stability within the

industry. "

"One supplier said that, over recent months, it had been asked by one multiple to make

three separate cash contributions: the third, by telephone, was Jor a sum in excess oJ

£JOO, 000 and was claimed by the multiple as 'a contribution towards profits '. The supplier

said that the same multiple had introduced other charges, none oJ which had been

negotiated and all oJ which had been deducted from the next payment. There had been no

recourse to complain Jor Jear oJ 'upsetting the relationship '. The supplier added that it had

been directed by the multiple to use a specified distributor, even if this meant breaking an

existing contract with another company. In supporting its claim Jor anonymity, the supplier

said that it would be commercial suicide Jor any supplier to give a true and honest account

oJ all aspects oJ relationships with retailers. "

The reason for presenting these quotes from vanous sources In this section is to draw

attention to the fact that there are a lot of dynamics involved in the buyer- supplier

relationship scenario. There has already been a lot of research conducted and more is being

conducted in the field of buyer-supplier relationships, mainly by studying partnership or

collaborative techniques or alternatively the negative issues of power and unethical

behaviour. The researcher thinks that the premise presented in this section warrants further

research in order to understand whether there are any other issues involved in buyer

supplier relationships, and primarily whether there is any other reason for organisations or

individual humans to show the behaviour as depicted in some examples above.

4

Introduction

1.3 Research Approach

As seen earlier, there are vanous factors to consider when studying buyer- supplier

relationships. The research approach has been mainly a qualitative one, as the researcher

needed to understand and explore whether there were any other issues involved in buyer

supplier relationships and whether there were reasons for a particular type of

organizational or individual human behaviour. This was not known from the literature

review, but the literature search did lead to some exciting concepts of ExitIVoice and

Situational strength (Mischel,1977; Mullins, 1999) which provided more understanding to

the aspect of power and behaviour in the supply chains. Exit! Voice concepts have already

been studied in the realm of supply chains (Helper, 1995), but situational strength is a new

concept to this research area, and the researcher has tried to get a better understanding of

the reasons of organisational behaviour and human behaviour on the basis of this concept.

The exploratory interviews and literature case studies highlighted once more the aspect of

humans in the chain and the issues of power and dominance both on the part of individual

humans and organizations. The aspect of game-playing and the presence of humans in the

chains, brought a new Psychological perspective to the research in tenns of studying and

understanding the games being played and the behaviours shown using a psychological

tool known as "Transactional Analysis" (Berne, 1964; Stewart and Joines, 1999). The

researcher has presented a brief introduction to this method and has devoted the subsequent

thesis to studying and understanding the buyer-supplier relationships using Transactional

Analysis.

1.4 Research Objectives:

The research was conducted in two phases. The first phase was a qualitative process which

focused on exploring the world of buyers and suppliers and gaining some insights into the

dynamics of their relationships. A review of the literature encompassing supply chains and

buyer supplier relationships identified that the subject was already saturated with large

amounts of published infonnation in the field of buyer- supplier relationships and supply

chain management. The interesting aspect was that for most of relationships and

transactions, explanations were sought by reliance on economic or technological domains.

Very few published works dealt with the relationship scenario from the perspectives of the

5

------------------ -----

Introduction

people involved in these relationships. Hence the first phase was designed to study the

issues raised through the depiction of quotes earlier in this chapter. The objectives for the

first phase were:

Objective 1: To explore the nature of buyer- supplier transactions and the dynamics

associated with these transactions particularly from the perspective of behaviours. and

attitudes depicted by the transacting entities.

Objective 2: To explore the experience of buyer- supplier relationships from the

perspectives of buyer and supplier representatives involved.

Phase one of this research provided two new insights for further study:

• Game-like behaviour

• Discretion. humans have in the relationship

To gain further understanding of these issues, it was decided to try and use two

Psychological concepts "Transactional Analysis" and "situational strength" to explain the

dynamics of buyer- supplier transactions. Hence, the next phase of research addressed the

following research questions:

I. Are transactions between individuals strongly influenced by the situational context

and the power relations in the organizations?

2. Where the manipulation of power in the organization is realized as games. is TA a

valid representation of these games?

3. If the games arise from the individual or the organization. is this contingent upon

the strength of the situation?

It was not in the scope of this research to try and test the research questions empirically.

Hence, it was decided to get a better understanding of the transactions and buyer-supplier

relationships by using a concept map (proposed in chapter five) and the ability of

transactional modelling using Transactional analysis. In chapter six, a few case-studies are

retrospectively analysed using the proposed methodology and Transactional analysis. This

does not validate the methodology, but depicts that the methodology and this research is

useful and can be improved further with future work.

6

1.5 Thesis structure

INTRODUCTION

Chapter 1- Chapter 2- Review Introduction of the Literature

lVIETHODOLOGY AND DIRECTION

Chapter 3- Research Chapter 4- Psychological Approach Implications

Chapter 5- Research Direction

RESEARCH CONTRIBUTION

Chapter 6- Making Sense of the Rese arch

CONCLUSIONS

Chapter 7 - The Research Experience

Figure 1.I Structure of the Thesis

The thesis is structured as shown above.

Introduction

Chapter one, sets the scene for the research, introducing the reasons for conducting the

research and presenting in short the different stages for conducting this research.

Chapter two, presents a brief literature revIew on the different concepts and theories

surrounding buyer-supplier relationships, and presents the research gaps in terms of

research objectives for the further stages of this research.

7

Introduction

Chapter three, presents the research approach employed by the researcher for conducting

this research. It presents a brief review of research methodology and then explains the

process of selecting the appropriate methodology for this research based on the research

objectives. It also includes the information about the data collected and analysed for this

research.

Chapter four, presents the introduction of "Transactional Analysis" for this research and

presents a discussion on the feasibility of using it for this research. It also highlights the

research questions for the next stage ofthis research.

Chapter five, presents the development of the concept map relevant to this research and the

development of a relationship framework, which depicts the dynamics of buyer-supplier

relationships.

Chapter six, presents the development of a methodology for supply chain alignment based

on relationship analysis and the use of case-studies to depict the usefulness of the proposed

methodology.

Chapter seven, concludes the thesis by summarising the complete research process and

presents from the perspective of the researcher, the limitations, contributions and future

tasks of this research.

1.6 Summary

This chapter has provided some background information for this research. It has discussed

the reasons for conducting this research and presented the different stages conducted for

completing this research. It has also presented the thesis structure, which gives the reader

an idea of what to expect in this thesis.

8

Review of the Literature

Chapter 2


Aim: This chapter aims to give the reader some information about the different literature

referenced by the researcher to understand the research area. It presents various theories

and concepts already available in the field of Supply chain networks and buyer-supplier

relationships. The researcher then uses these concepts to generate research objectives

which will influence his thinking as the research progresses.

2.1 Introduction

The Alignment of the structure and operations of supply chains (demand networks) has

been the focus of a number of recent works in the area of supply chain management

(Fisher, 1997; Harland, et. aI., 1999; Lamming, et. aI., 2000; etc.). Various publications

have been devoted to addressing questions regarding alignment of supply chains and the

issues involved in aligning. This research has been conducted under the auspices of an

EPSRC funded project "The Development of a Systemic Framework for Supply Chain

Alignment". The project was initiated with the intention of studying the various variables,

which would provide an insight into" How do we select the right supply chain and what

do we align it to? There has been research conducted on numerous occasions on the aspect

of selecting the right supply chains. But, previous research has primarily focused upon

operational supply chain alignment and most notably the alternative lean and agile models.

Although the role and impact of information transparency along the supply chain have

been reasonably emphasised and elaborated in this stream of works, there has been

relatively little work to align the strategic and operational perspectives with the

information system viewpoint (Lamming, 1996). A second stream (Cox, et aI., 2000) has

focused on relationships in supply chains and in particular has suggested the power

regimes (dyadic relationships between players in a supply chain) and power distribution in

. the supply chain as the responsible factors for the structural form and operation, and hence

the alignment of the supply chains. This approach mainly focuses on value appropriation as

the main objective in the creation and management of a supply chain, which corresponds

with the power attributes of the supply chain. Both approaches have endeavoured to

9

Review o/the Literature

develop theories for supply chain management and to discover the DNA of business and

supply chains (Cox, 1999). The project was conducted in collaboration by researchers at

Loughborough and Liverpool universities. The project introduced a new framework for

supply chain alignment, where in it studied the alignment issue from two aspects: I) the

technological and operations perspective, and 2) the relationships perspective. The

framework suggested that for alignment of supply chains these two streams had to be

aligned internally for a supply chain and externally between supply chains in supply

networks. Researchers at Liverpool University concentrated on the technological and

operations perspective and the study of the relationships perspectives was conducted by the

author of this thesis at Loughborough University.

The author (henceforth called the researcher), had a task of studying the alignment of

supply chains from a relationship perspective. This required the researcher to first get

acquainted with the concept of supply chains and supply networks and the different

theories already published around these two domains. In this chapter the researcher has

presented to the readers a brief review of supply chains and their management, followed by

the different theories associated with supply chains. This study then led the researcher to

delve further into the aspect of supply chain relationships and hence the study of already

published research on buyer- supplier relations and issues associated with buyer- supplier

relationships. Finally, as the chapter ends, the researcher raises some issues which he

thinks, need further exploration in the field of buyer- supplier relationships.

2.2 Supply Chain Management

The phrase 'supply chain management' appears to have originated in the early 1980's

Oliver and Webber (1982) discussed the potential benefits of integrating the internal

business functions of purchasing, manufacturing, sales and distribution (Harland, 1996).

Since, 1982, there have been numerous definitions for supply chain management, some of

them are:

Supply chain management is an integrating philosophy to manage the total flow 0/ a

distribution channel/ram supplier to ultimate customer (Ellram and Cooper, 1993).

10


Integrated Supply Chain Management is about going from the external customer and then

managing all the processes that are needed to provide the customer with value in a

horizontal way (Monczka and Morgan, 1997).

All the activities involved in delivering a product from raw material through to the

customer, including soureing raw materials and parts, manufacturing and assembly,

warehousing, and inventory tracking, order entry and order management, distribution

across all channels, delivery to the customer, and all the information systems necessary to

monitor all these activities. Supply chain management coordinates and integrates all of

these activities into a seamless process. It links all of the partners in the chain including

departments within an organisation and the external partners including suppliers, carriers,

third party companies, and information system providers (Lummus and Vokurka, 1999).

There are four main uses of the term 'Supply chain management'

I. The internal supply chain that integrates business functions involved in the flow of

materials and information from inbound to outbound ends of the business.

2. The management of dyadic or two party relationships with immediate suppliers.

3. The management of a chain of businesses including a supplier, a supplier's

suppliers, a customer and a customer's customers, and so on.

4. The management of a network of interconnected businesses involved in the

ultimate provision of product and service packages required by end customers.

(Harland, 1996)

The research focus for this research is about exploring supply chain relationships and the

definitions of supply chain management given above agree that supply chain management

is an appropriate tool in order to study relationships between supply chain entities.

11


Acquisition .. S

I . upply chain Equity interest

management

Joint venture

Long term contract 0.. I

bhgatlonal contract or

.. relational exchange

Short term contract I ~ .. ~----------~~----------~

transaction

Figure 2.1 : Supply chain management as a type of relationship ( adapted from Harland,

1996)

2.3 Supply Chain Alignment

Alignment of the structure and operations of supply chains (demand networks) has been

the focus of a number of recent works in the area of supply chain management. Academics

have attempted addressing the issues such as "what the supply chain should be aligned to"

and "what are the aspects of managing supply chains which need to be aligned". Two main

themes have appeared in published works to answer these questions. Focusing on the

physical and operational aspects, the first approach has been to classify supply chains in

terms of their structure (vertically integrated or horizontally managed), product strategy

(modular or integrated), and process strategy (cost efficient or responsive) in response to

the market and products' characteristics. The classifications lead to suggestions on the

alignment of supply chains' operational strategies [See works by Fisher (1997), Fine

(1998), Lamming et a!. (1999), Christopher and Towill (2000), Rich and Hines (2000)].

From the operations point of view this approach is essentially based on and supported by

the lean approach to manufacturing and has tried to extend lean thinking beyond the

12


borders of a single company to its customers and suppliers through closer relationships or

partnership.

There has been growing academic interest in the configuration of supply chains to suit a

particular product and market strategy. Proponents of lean thinking have contributed

significantly to the area of supply chains, especially in terms of physical and operational

alignment by introducing new insights, ideas and practices in managing the value streams.

These valuable contributions, however, have suffered from the lack of a classification

framework. Fisher (1997) suggested a framework for overcoming this deficiency by

suggesting that the supply chain operations (classified in terms of efficient or responsive)

should be aligned to the product/market characteristics (described as either functional or

innovative) and that two "valid" alignments exist. Fisher (1997) asserts that functional

products require an efficient supply chain since the key costs for such products lie in the

production, transportation and inventory costs. Innovative products on the other hand

require responsive supply chains where the key cost is market mediation. Academics

researching into the application of lean and agile principles to supply chains have proposed

that supply chains need to be either lean (where waste reduction is the key driver) or agile

(where customer service is the key driver). Adopting the same approach, Lamming et al.

(2000) proposed an initial classification of supply chains as an extended version of Fisher's

model, and which incorporates two dimensions of product type (enhanced with the idea of

product uniqueness) and product complexity, leading into the identification of four

different classifications of supply networks.

Fine (1998) initiated a different perspective in the analysis, classification, design and

management of supply chains. Trying to layout some theories of business genetics, Fine

has coined the term clockspeed to represent the rate of evolution in business and the

measure which determines the prospective life cycle of the supply chain until it evolves

into another form. Technology and competition are considered to be the drivers of

clockspeed. Fine introduces three key dimensions in business for which clockspeed can be

measured: product technology; process technology; and organizational decision-making

where the clockspeed of the latter is implicated by the level of two other dimensions'

clockspeed. According to Fine (1998), the clockspeed of an industry determines the

structural form, and hence the characteristics of the supply chain. Fine identifies the

capability to design its supply chain as the most important core competency of an

13


organization. Demonstrating the supply chain dynamics in terms of "Double Helix",

analogous to the biology metaphor, Fine distinguishes between two types of chains. First is

the integral end product architecture and the other modular end product architecture, each

requiring a different degree of integration.

According to the existing classification and models, supply networks must design their

business strategy according to (a) market requirements and characteristics, and (b) the rate

of new product introduction. These two factors can be determined by product type (Fisher,

1997; Fine, 1998), product complexity (if applicable) (Lamming et aI., 2000), and process

(Fine, 1998). In terms of operations, the strategy, according to Naylor et al. (1999), and

Christopher and Towill (2000), can be engineered to design the production systems to be

lean or agile or perhaps both ( the concept of leagility) to take simultaneous advantage of

the benefits of leanness and agility. In practice, this means that product configuration

should be postponed along the supply chain according to the market characteristics.

This view of Alignment depicts the alignment of the demand networks to the market

requirements. The presence of humans in the supply chains warrants further study for

considering human behaviour as an important aspect of alignment. This has been proposed

to some extent by Gattorna and Waiters (I996). According to them, the four key elements

that comprise the strategic alignment model are:

• The market and/or client base

• The organisation's strategy with which it responds to the market

• The organisation's culture which represents it's internal capability to implement

this strategy

• The leadership/ management style it uses to shape the culture and drive the

strategy.

14


Competitive Rules of the game Environment

t ~ Cstrategy ) How the company

plans to play the game

t Culture The capability to

play the game

t ~ Building a team vision to play the game

Figure 2.2: The principle of strategic alignment (adapted from Gattorna, Waiters, 1996)

Any strategy is only appropriate in a given set of competitive conditions. Also, specific

organisational cultures and leadership styles are only appropriate for given strategic

situations. Alignment is the 'appropriateness' of the various elements relative to one

another (Gattorna and Waiters, 1996).

2.4 Supply Chain Relationships

Supply chain relationships have been researched by many researchers to date and they are

still a very dynamic area as far as knowledge of relationships is concerned (Harland, 1996;

Lamming, et. aI., 1996; Landeros and Monczka, 1989; Dyer and Chu, 2000; Porter,1998;

Stuart, 1997). The research has concentrated on the actual dynamics of the supply chain

and the role of each entity at the inter-organisational boundary. Supply chain relationships

have been studied in the context of different business trends(Harland, 1996). These trends

include:

a) increasing incidence of vertical disintegration

b) implementation of supplier-base programmes.

15


c) focussing on operations

d) outsourcing

e) just-in-time

f) increasing popularity of partnerships and partnership sourcing .

Most of the work on relationship management has been focussed on one or more of the

above given trends. Some of the researchers have tried to work on developing Relationship

assessment programmes (Lamming, et. al. 1996) which have tried to focus more on Vendor

assessment. The emphasis upon managing the supply chain as a source of competitive

advantage has led many organisations to reassess the role of the supplier within their own

ability to achieve or sustain competitiveness and customer service. In the survey

(Lamming, et. aI., 1996) the customers identified 'improved overall quality', 'better all

round service', 'improved delivery perfonnance', and 'improved relationships' as their top 4

benefits from using vendor-assessment schemes. The suppliers tended to agree although

'improved relationships' was the top benefit for them. This shows that relationship

management is one of the major concerns in Supply chain management.

One major concern that arises is that of Power in the chain. Generally the most powerful

entity controls the chain and dictates the operation of the chain. Relationship management

is thus also a function of the Power structure of the chain. Most research focuses on

improving relationships, but the solutions are more tailored to meet the requirements of the

most powerful entity in the chain. Another important feature to consider is the perceptions

that buyers and suppliers have about each other's perfonnance and working (see, Harland,

1996, 1997; Holmlund and Strandvik, 1999). Some of the major concepts influencing the

study of supply chain relationships are discussed below.

2.4.1 Transaction Cost Economics

Transaction cost economics (TCE) focuses on the costs involved in making transactions

rather than the costs of producing a product. TCE emphasises the elements that govern

transactions. TCE tries to derive the optimal governance mechanism under a certain set of

situational contingencies (Barney and Hesterly, 1999). Three assumptions underlie

decisions on a given governance mechanism.

1. Individuals in any economic system have a bounded rationality. It means that while

people intend to be rational, in reality their cognitive capabilities are limited.

16


2. at least some individuals are inclined to be opportunistic or to act in self- interest in

guile.

3. information is asymmetrically distributed. Thus parties to many transactions have

access to only incomplete, imperfect or imbalanced information. (Williamson,

1985)

Transaction cost economIcs has an important role to play in how the buyer- supplier

relationship is constructed and managed. In the TCE framework, the costs of any

transaction comprise the costs of planning, adopting and monitoring operations

(Williamson, 1996). According to Williamson (1985), in the case of high level of

collaboration, the buyer- supplier relationship will be close to the vertical mode of

governance, whereas in cases of lower levels of collaboration, the relationship will be close

to the spot-market mode of governance. In the original framework (Williamson, 1985)

refers to three dimensions to study the governance mechanisms: transaction specific

investments, uncertainty and frequency.

Transaction specific investments involve human and physical assets that are dedicated to a

particular relationship and cannot be easily deployed. The researcher's interest in this

concept stems from the study of opportunistic behaviour (discussed later in the chapter),

and the effect opportunistic behaviour has on buyer- supplier relationships. Jap (2000) has

suggested the use of mutual investments as governance mechanisms to limit opportunistic

behaviour. According to Williamson (1996), transaction-specific investments are so critical

that they transform the nature of the exchange; rendering firms both in valuable and

vulnerable positions. In a valuable position, the investments allow for coordination of

activities and exploitation of complernentarities of assets. In a vulnerable position,

transaction- specific investments can create a situation in which a number of potential

partners is small and a firm becomes dependent on its counterpart (Kemp, 1999). The

researcher limits this discussion on TCE, as the researcher's interest interms of this

research was in Transaction-Specific Investments. If the reader wishes to study this in

detail for its advantages and limitations, refer to [Cook and Emerson, 1978; Powell, 1990;

Barney and Hesterly, 1999; Anderson and Narus, 1990; RindfIeish and Heide, 1997)

17


2.4.2 Relational Contracting theory

Macneil (1980) developed a typology of business relationships as discrete versus relational

exchanges. A discrete exchange is consistent with the assumption that individual

transactions are assumed to be independent of past, or future relations between the

contracting parties and constitute nothing more than the transfer of ownership of a product

or service. This resembles the spot-market transaction as proposed in Transaction Cost

Economics. Relational exchange, explicitly accounts for historical and social context in

which recurrent transactions take place. It views enforcement of obligations as following

from the mutuality of interests between a set of parties (Macneil, 1980; Dwyer, et. al.

1987; Dyer and Singh, 1998). In relational exchanges, individual goals are reached in a

bilateral system through joint accomplishment (Heidi, 1994), while concern for the long

run benefit of the system serves to restrain individual tendencies to pursue their own self

interest in an opportunistic fashion (Ouchi, 1980; Dyer and Singh, 1998). This bilateral

governance incorporates the spirit of a collaborative buyer- supplier relationship as it helps

to reduce opportunistic tendencies that erode the value of specific assets. The relational

exchange concept along with bilateral governance supports the importance of individual

behaviour in the relationship and the concept of situational strength (discussed later in the

chapter).

2.4.3 Purchasing Literature

As outsourcing components has become the pnme focus of most manufacturing

companies, purchasing has become a very important function in today's manufacturing

companies. The original approach to purchasing was to 'get the right component at the

right price', and was based on one-off transactions between buyers and sellers, two

individuals within two separate organisations. The transactions would generally tend to be

the active buyer dictating tenns and conditions to a passive supplier. Hence, most of the

focus in the purchasing literature and in the industrial environment tended to favour the

buyer as the customer being the most important entity in the relationship. Pooler and

Pooler (1997) describe how this supposition actually leads to an inherent adversarial

approach "the essence of buying is to create competition among sellers, just as selling

legitimately seeks to eliminate it. The ability to reward or punish a supplier by using

economic leverage in purchasing is a powerful responsibility".

18


Even though tenns such as "collaboration" or "partnerships" have expanded the approach

taken by purchasing to supplier management and supplier development activities, the

dominant role played in these relationships is generally by the buyer or customer. Supplier

development itself "has its essence in an active partner (the customer) who puts resources

into improving its suppliers" (Bumes and New, 1998). As a consequence of the focus on

the buyer, "most of the research on partnerships has tended to focus on the role of the

customer in establishing/managing supplier partnerships" (Burnes and New, 1996).

2.4.4 Collaborations

Collaboration is a departure from the discrete type of exchange to the relational bilateral

exchange. Collaborating partners work together to achieve mutual goals (Anderson and

Narus, 1990; Morgan and Hunt, 1994). A relational exchange continues over time and each

transaction is viewed in tenns of its history and anticipated future. Since the duties and

perfonnance may be relatively complex and occur over an extended period, the parties in

the relationship may direct much effort toward careful plans, which define and measure the

outcomes of the exchange. Changes in agreements and problems are expected and parties

are expected to be flexible and set up a mutual mechanism for solving problems

(Noordeweir, et. a!. 1990). Hence, in a relational bilateral exchange collaboration requires

that activities should be undertaken jointly (Heide, 1994) and that there should be

flexibility to make adjustments (Noordeweir, et.a!' 1990)

Flexibility to make adjustments is the willingness to make adaptations in day-to-day

management as circumstances change (Heide and John, 1992). The partners accept smooth

alterations in practices and policies in times of unforeseen or changing conditions. A high

level of flexibility allows for ongoing planning and continuous adjustments of obligations

between the parties, especially in a fast changing environment (Heide, 1994).

Joint action comprises joint planning and joint problem solving. Joint planning refers to

collaborative activities by which future contingencies and consequential duties and

responsibilities in a relationship are made explicit in advance (Heide and John, 1992).

Dwyer, et. a!. (I 987) suggested that input to decisions and goal fonnulation are important

aspects of joint planning and improve planning perfonnance. Joint planning then allows

mutual expectations to be established and collaborative efforts to be specified at the outset.

19


Joint problem solving refers to joint activities to resolve disagreements, technical failures

and other unexpected situations (Lush and Brown, 1996; Heide and Miner, 1992). Firms

often attempt to persuade each other to adopt a particular solution to a problem situation. In

collaboration, these persuasive attempts are more constructive than coercive or dominative

(Dwyer, et. aI., 1987).

2.4.5 Partnerships

Macbeth and Ferguson (1994) use the phrase 'partnership' to refer to the intermediate

types of relationship shown in the figure:

Merger or acquisition

Vertical integration

Joint venture

PARTNERSHIP

i--------r-----------,---------, , , , , , , , , , , : '

Strategic alliance

Minority shareholding

Shared destiny

Purchase Product life order or spot

market

Pure marl<et

Figure 2.3: Partnership as a type of relationship ( adapted from Harland, 1996)

Partnering has received much attention by academics and practitioners, with the

automotive industry as a basis for the development of most studies. Langfield-Smith and

Greenwood (1998), report that the automotive and component industries provide an

interesting focus for studying partnering and collaboration (Veludo, et aI., 2004) .

According to Kim and Michell (1999), the automotive industry is a good illustration of

both the adversarial and the relational models of buyer supplier relationship. It is often

claimed that car manufacturers now work almost exclusively in partnership with their

suppliers (e.g. Arminas, 2000). Bumes and New (1996) emphasise "there is no universally

agreed definition of partnership". Hill (1996) summarises the theme by saying,

"partnership is the relationship between two organisations in order for them to survive

20


within the marketplace". Rackham (2001) states that "successful partnerships are about

radically redesigning business relationship ............. partnership creates new value that

could not be achieved within the existing vendor/customer roles".. Many recent

practitioner articles have focused on prescribing how partnership can best be achieved (e.g.

Rackham, 2001; Kador, 2000) .. The importance of supplier management has been

recognized by academics and many studies have reported the advantages to be gained

from partnerships (e.g. Monczka et al., 1993; Lamming, 1993; Helper and Sako, 1995), or

from strengthening existing relationships (Kerns, 2000). Brennan (1997) discusses

partnership in terms of dependency between the two parties, whereas Ellram and Hendrick

(1995) define partnership as a relationship between two firms which involves a

commitment over an extended period of time, the sharing of information, as well as the

risks and rewards of the relationships. Veludo, et aI., (2004) state that the concept of

partnering is important within the MNC (multi-national company) network form of

organisation as partnering increases the ability of the organisation to coordinate

communication and resources efficiently. Wyatt (2001) has conducted an exploratory study

of partnerships in the European automotive industry. According to her, although customer

supplier roles exist, these roles are reinforced through the lack of clear and established

partnership roles and behavioural norms, hence customers and suppliers have different

perceptions of what constitutes partnership.

The nature of partnerships

Webster (1992) states that the relationship between manufacturers and suppliers can take

many forms. Webster's representation of this range is shown in Figure 2.4 . This can be

seen on a continuum ranging from purely discrete transactions at one end, to long-term

relational exchanges between interdependent partners at the other (Mohr and Nevin, 1990).

I ~ I t-. I ~ Buyer-Seller

Transactions Repeated long-Term PartnershipS

Transactions Relationships . (Mutual, Total

I V I V I V Dependence )

Figure 2.4: The range of supplier relationships (adapted from, Webster,1992)

21


Webster suggests that there is only one type of partnership. However, Lambert et al.

(1996) propose that there are three kinds, depending on their character. (figure 2.5)

(I) "short-term" (type I);

(2) "long-term" (type 2); and

(3) "long-term, with no end" (type 3).

Arm's Length

I

B Partnerships

BB I Jolnl Ventures

Vertical Integration

Figure 2.5: Types of relationships (adapted from Lambert, et al.,1996)

Lemke, et al. (2003) discuss the above mentioned (Lambert, et aI., 1996) use of the time

dimension to differentiate between partnership types by saying that "in practice, it cannot

be assumed that a manufacturer and a supplier in a long-term relationship see themselves

in partnership. It could be that the manufacturer has purchased the product from the

supplier over several years due to a consistently low price. Their relationship may not go

anywhere beyond the placing of an order and its delivery. Partnerships are a special form

of supplier-manufacturer relationship; they are much closer than other forms and a deeper

analysis than that of simply the time dimension". Lemke, et a\. (2003) have concluded in

their literature review on "partnerships" that "partnerships ... are generally recognised as

close business relationships (Lambert et al.,1996; Ellram, 1991). However, although

researchers are in agreement that the degree of relationship closeness is a good angle for

exploring partnerships, this approach has not previously been operationalised". According

to Ford (1984), manufacturers and their suppliers now emphasize close relationships,

rather than "playing the market", where they focused solely on cost reduction. While, Ford

(1984) has suggested that relationship closeness could be explained in terms of distance

that exists between the buyer and seller, Kalwani and Narayandas (1995) make the point

that the level of closeness may indicate the presence of nothing more than joint action and

expected continuity of the relationship. According to Ford (1984), relationship closeness

could be explained in terms of five dimensions:

22

(1) geographical;

(2) time ( length of the relationship);

(3) technological;

(4) cuI tural; and

(5) social.


Partnering is thus the preferred choice for relationships in which there is a high degree of

mutual interdependence and where the failure to perform by either party severely impacts

the performance of the other. The advantages of this approach towards partnering have

been depicted by the research conducted by Kraljic (1983) and Olsen and Ellram (1997).

In essence, management has struggled with foregoing the short-term cost reductions of

arm's length relationships for the long-term benefits of alliances and strong partnerships.

Conversely, the management of these long-term relationships requires a substantial amount

of resources,(Dwyer et aL, 1987; Simpson and Mayo, 1997). Consequently, new research

suggests traditional adversarial relationships continue to exist, under the new name of

alliances and partnerships, (Williams, et ai, 2002). Whipple and Frankel (2000) have

indicated that the transition from adversarial to cooperative relationships has been difficult

for many managers. Bringing about the necessary changes in organizational culture and

behavior for this transition have proven quite overwhelming (Watts et aI., 1995). McIvor

and McHugh (2000) maintain that organizations will have considerable difficulties in

partnering with external entities if they cannot develop a partnering culture internally. On

the whole, partnerships can be characterised by a high level of commitment, mutual

dependency, trust, and a long-term orientation where the sharing of information as well as

risks and rewards are typical, ( Lemke, et.aL, 2003)

2.5 Issues affecting Supply Chain Relationships

2.5.1 Power

Power is defined as the ability of one actor to affect the behaviour of another. Having or

acquiring power is an attractive option for a business in a supply network because it

increases its ability to gain maximum advantage for itself. However, the situation is

complex in that, although a business may have power as a supplier to one firm, it may not

have power with another supplier and may also be subject to the power of a buyer.

23


The issue of power has been explored by Andrew Cox, et. al. (2000), Jablin (1987), Conrad

(1983), Pfeffer (1981) among many others. Dahl's (1957) definition of power is the

capacity of actor A to get actor B to do something that actor B would not probably do.

According to Cox, et al. (2000) the buyer is dominant when the relative utility and scarcity

of the buyer's resources for the supplier is high whilst the relative utility and scarcity of the

supplier's resources for the buyer is low. When this is in reverse then the supplier is

dominant. In the Cox view, wielding power is not a negative process but an essential

element of strategy and planning. All firms attempt to frame their relationships with

outside bodies to their own advantage. This advantage is designed to maximize their own

revenue and keep competitors out. Having and wielding power does not necessarily have

negative connotations for the others in the relationship that are less powerful. All

companies will be in a variety of relationships some, where they do have power and many,

where they do not. The concept of Power Regimes has been put forth by Cox, et. al. (

2001,2000,2002) in order to understand the nature of exchange power ( buyer- supplier)

and its impact on relationship management choices. The framework is informed by a

recognition that although power advantages might often be explicitly exploited in buyer

supplier interactions, the very existence of power imbalance conditions buyer and supplier

behaviour (Cox, et. aI., 2001). The framework also known as the Exchange Power Matrix

is constructed around four basic types of buyer- supplier structures- buyer dominance,

supplier dominance, buyer- supplier interdependence, and buyer- supplier independence.

The four power structures are based on the fundamental premise that the power of one

actor or organisation over another is determined by the extent to which that actor or

organisation is dependent on the other for particular resources. Hence the framework is a

function of two variables: relative utility and relative scarcity of resources brought by each

of the parties to the relationship(Cox, et. al. 2000).

24

High

Relative utility and scarcity of buyer's resources for suppliers

Low

Review of tire Literature

Buyer Dominance Interdependence

> --

0 <

Independence Supplier Dominance

Low High

Relative utility and scarcity of supplier's resources for buyers

Figure 2.6: The Exchange Power matrix (adapted from Cox, et. aI., 2000)

From the figure it is evident that, the buyer would have power (dominance) over the

supplier if two conditions are held true. First, the buyer offers the supplier resources that

are both relatively scarce and regarded by the supplier as having a relatively high utility.

Secondly, the supplier's resources are relatively plentiful and are of low utility to the

buyer. If the opposite is true, then the supplier would have power (dominance) over the

buyer. The buyer and supplier are said to be interdependent if the relative utility and

scarcity of the resources held by each party are high. The buyer and supplier are

independent if the relative utility and scarcity of resources held by each party are low. The

researcher has presented this information in order to explain some of the underlying

philosophy of this concept in looking at buyer- supplier relationships. The information is

concise and is not provided in greater depth. If the reader wishes to study the concept in

detail, reference should be made top Cox, et al. (2001, 2002). The Power matrix

distinguishes four different power scenarios, but these are shown representing the

relationship in a dyad. For a supply chain the relationship needs to be considered for the

upstream and downstream entities, hence for eg: ifthere are 4 entities in the Chain A, B, C,

0, then the power structures for the chain could be shown as A<B=C>D. This is just one

depiction, but Cox, et. al,(2000) have depicted 16 buyer-supplier exchanges which they

25


tenn as Power Regimes. This depicts who has the power in the chain and controls the

working of the chain. The power regimes model is primarily based on an economics point

of view and is structured around getting maximum value for an entity from the exchange

relationship. According to Cox, (1999), the important decision for companies when getting

involved in supply chains is about how they will control and manage the primary supply

chain. They face decisions about where they should position themselves in the chain. At

one end, they can decide to vertically integrate the whole chain from raw material to end

customer, or at the other end, can decide to own only one or two of the resources that exist

in the chain. Cox (1999), argues that essentially business is about appropriating value for

oneself; it is not about passing value to customers unless circumstances decree that this is

the only option available to the company in order for it to sustain itself in business. The

theoretical ideal in business is to be able to put oneself in a position where neither

customers, employees, competitors nor suppliers can leverage value from the business,

while being in apposition to leverage all of them. Thus only by having the ability to

appropriate value from relationships with other- whether these are with customers,

employers or suppliers- can business success be attained (Cox, 1997). The success or

failure of a supply chain management initiative is primarily a function of the complex

pattern of exchange power that underpins supply network relationships. It is the nature of

the exchange power that defines the real commercial interests of buyers and suppliers and

detennines whether they can and therefore should try to manage their direct and indirect

relationships with others in their supply network (Cox, et. aI., 2001). Hence, it is proposed

(Cox, 2001 a) that, with relation to the Exchange Power matrix, if an improvement in value

is to be achieved, it is imperative that buyers change the current power circumstances they

are in to one that is more profitable. These changes also known as routes are six in number

and depending upon the position the relationship is at present gives an indication to the

buyer for next stage. The routes are:

I. Supplier Dominance to Buyer Dominance

2. Supplier Dominance to Interdependence

3. Supplier Dominance to Independence

4. Interdependence to Buyer dominance

5. Independence to Interdependence

6. Independence to Buyer dominance

26

Review afthe Literature

The suppliers will have counter- strategies to gain Power. The routes the suppliers will try

to take will be to increase value appropriation from their relationships with buyers.

The movement by either the buyer or the supplier to interdependence is the most important

and difficult. Interdependence as described in Cox (200 I b) is a discipline. Parties cannot

just do what they want, but must proceed through mutual consent. Interdependence places

restriction on the pursuit of self- interest. This is the realm of partnerships and

collaborations. For achieving the movement to Interdependence, Cox (200Ib) suggests,

that buyers should:

I. work closely with preferred suppliers for technology and innovation sharing

2. lock-in high quality suppliers.

3. create jointly owned product Iservice differentiation.

This also complements the work done by Sandy J ap (2001) wherein she has proposed

governance mechanisms to limit opportunism by both parties and create Interdependence.

Cox, et. al. (2001), suggests that a finn's success in co-ordinating its direct and indirect

relationships in an extended supply network depends on more than just cultural alignment

and managerial commitment. The researcher thinks that this is fine until the scenario of

strategic movements start. When there is a change in stance taken by a finn about its power

position and the dynamics involved, the humans working in the organisations are affected

by the transaction or for that matter the transaction is also affected by the humans present

in the relationship. There is no mention in the literature regarding this and so it is necessary

to study the dynamics of the transactions from a human perspective. It is necessary to

explore this perspective to get a better understanding of what happens in the transaction

even though the overt decision for the transaction was for an economic purpose. The

human involvement lends a more deeper meaning to the supply chain transactions and

relationships. Hence one of the objectives ofthis research would be:

Ta explore the dynamics of supply chain transactions from a human perspective.

The issue of power is usually accepted as a circumstance of the collaboration and many

companies accept the rules and conditions applied by their often larger and more powerful

collaborator. The situation becomes more serious if there is a problem to be negotiated

where one of the partners stands to lose a considerable amount if they do not at least

achieve some reparation. In a problem situation when a consignment of goods has been

27


received but is now not wanted then the more powerful member may attempt to maximise

their own position perhaps at the expense of the other less dominant partner. Hence power

has value in that it enables a business to strategically optimise its relationship in favour of

its preferred strategy, but can also be used inappropriately or in a manner that causes

damage to a relationship. The application of power applied appropriately to define rules of

partnership or inappropriately to gain advantage in a problem situation is not always the

same as opportunistic behaviour. Although opportunistic behaviour particularly if

successful is likely to change power relationships.

2.5.1.1 Facets of power

In supply networks, more than one company may try to exert power on the network. Some

companies will see it as their role to control or try to control the network. Generally, the

roles that each entity in the network perceives for itself as a member of the network will

decide the power structure of the network. A firm may try to increase the power over

activities and resources due to the greed / lust or resource scarcity, this causes for

Alliances, Mergers and Takeovers in the supply chain networks, or vertical integration.

The series of the dyadic relationships between entities will eventually lead to a pattern of

power in the network and as many proponents of network theory have said a supply

network rarely has a single powerful entity, the network has firms exerting power at

different positions depending upon the relative dyadic relationships around the position.

Thus, Relative Resource endowment, Amount of information / knowledge possessed,

technology, competencies play a very important role in determining powerful entities.

Hunt and Nevin (1974) developed a model of power that divided power into coercive and

non-coercive types. Negative coercive power means 8's perception that A has the ability

to mediate punishments for him. If the buyer is the more stronger, more powerful trading

partner, it has both coercive and non- coercive sources of power that can be exercised to

control the supplier. Punishment is the source of employing coercive type of power. The

main sources of Non-coercive power include reward, expert, referent and legitimate power

(Ratnasingam, 2000). Hence, in any relationship in the supply chain, the decision to use a

certain type of power creates the relationship strategy that transacting entities employ for

the relationship. These issues of power sources are used in scenarios such as: if one entity

wants the other entity to abide by its requirements, or when creating and distributing value

in the chain, or just trying to control the relationship.

28


Punishment Coercive

Reward

Expert Non-Coercive

Referent

Legitimate

Figure 2.7: Types of Power in a Buyer- Supplier Relationship (adapted from Ratnasingam,

2000)

The notion that supply chain proponents have about supply chain relationships and

partnerships is that these would bring about value creation in the chain and this would be

passed on to the customer. What really happens is that there is a fixed value in any chain

and as the chain is optimised, the value, which is divided along the chain starts getting

accumulating near the powerful entity, which means the distribution of value along the

chain favours the powerful entity and this is the reason for power struggle in the chain

(Cox, 1999), though there are some psychological and social reasons too, which will be

considered later. The distribution of fixed value among the entities would take place in

forms such as:

• Penalise (An Automobile manufacturer asking suppliers to cut prices by 10% every

year)

• Facilitate / service ( A Supermarket sells data acquired at point of sales to its suppliers)

• Sharing/ Cooperation (sharing of resources ; commitment of resources by members)

• Redistribute ( redistributing profit at the end ofthe year among the network members)

29


As per Cox,( 1997) ; Business Success is not ultimately passing value to the customer, it is

about keeping it for oneself. He believes that the two most important points to be followed

by entities in supply networks and relationships are:

• The ability to understand the structure of power and leverage operating in existing

supply chains

• The ability to understand the functionality flowing through supply chains and how to

transform this to destroy existing supply chains and create new power structures.

Porter, (1980, 1998), has put forth some scenanos describing the power relationships

between buyers and sellers. The following figure depicts the strategies that buyers and

suppliers use to gain power in the relationship and control the supply chain.

The Buyer is Powerful when; The Supplier is Powerful when;

\. Buyers are concentrated. \. Suppliers are concentrated.

2. Alternative sources of supply exist. 2. Supplier Switching costs are

high. 3. The cost of supplies is a

high percentage of buyers 3. Suppliers integrating total cost and so buyers are forward. more likely to shop around and squeeze the suppliers. 4. Customers are not perceived

valuable. 4. Buyers backward

integration .( buyers developing new suppliers)

Figure 2.8: Porter's Strategy for Buyers and Suppliers

2.5.2 Exit-Voice

Albert O. Hirschman (1970) while musmg on the deterioration in the service of the

Nigerian State railway formulated a theory of 'responses to decline in finns, organizations,

30


and states'. He postulated two types of responses to such problems: 'exit' to a better

alternative; and 'voice' defined as ' any attempt at all to change, rather than to escape from,

an objectionable state of affairs'. Borrowing Hirshman's theory Helper, (\995) applied the

terms to buyer-supplier relationships in the automobile industry. She identified two types

of responses to problems arising in a customer-supplier relationship:

I. Exit, where the customer firm's response to problems with a supplier is to find a new

supplier;

2. Voice, where the customer's response is to work with the original supplier until the

problem is corrected.

The customer's choice of method of problem resolution is an important one, because it

affects not only the customer's and supplier's relative bargaining power, but also their

propensity to introduce new technologies of various types. It is easy to see that the exit

strategy gives the customer a great deal of bargaining power because it has little

commitment to anyone supplier. Conversely, the voice strategy reduces the customer's

bargaining power by increasing its costs of switching between suppliers. On the other

hand, most types of technical change require moderate to higher levels of both

commitment and administrative co-ordination, thus favouring voice strategy. Trust also

plays a very important role in achieving voice relationship as the pay-offs are achieved in

the long term and very difficult to observe outright (Helper, 1995). What form this will

take depends on the situation, and may vary from supplier to supplier and customer to

customer.

Exit represents the "perfect market stance" where customers who are not satisfied take

their business elsewhere. This corresponds to the independence stance in the Cox grid.

Customers will simply terminate the relationship if the customer-supplier situation fails to

live up to promise. This situation is quite different if there is dependency and it is highly

likely that voice strategies will be used if there is buyer or supplier dominance. What form

this will take depends on the situation, and may vary from supplier to supplier and

customer to customer. If either of the parties in the Supply relationship are suspicious of

opportunistic behaviour or inappropriate use of power, then the parties depending upon

their level of dependency can choose the appropriate strategy to control the relationship.

31


Exit strategy maximises buyer bargaining power, whereas a Voice strategy maximises

most types of technical change. What is thus required is trade-off between bargaining

power and technical change. Helper (1995) suggests that while some exit is helpful in

encouraging suppliers to listen to Voice, too much exit can have a negative impact on

Voice and system performance due to three reasons:

I. When buyer firms instead of using Voice and helping low- quality local suppliers

to improve, use exit and start sourcing from other places or abroad, the local

suppliers, workers, and communities are left to cope with the consequences.

2. The presence of suppliers practising an "exit- based competition" (acceptance of

low margins and little investment in building technological or organisational

capabilities) can drive out suppliers who want to practise Voice- based competition.

3. Different organisational structures required by buyer firms to practise both exit and

voice on a large scale which makes it difficult for exit and voice strategy to co-exist

in a firm.

Humphrey, Ashforth (2000) conducted research in order to study whether a dual strategy

(exit-voice) existed in buyer-supplier relationships. They suggested that similar to the

Leader- member Exchange theory buyers use two different interaction styles with their

suppliers. With in-group suppliers, buyers use Voice strategies and provide extra help,

whereas with out-group suppliers, buyers use exit- strategies and threats. This tends to

suggest that even though different organisational structures are required by buyers to

practise dual strategies and it makes it difficult, the segregation of suppliers in "In-group",

and "Out-group" gives a certain guideline to employees in their representative roles of

buyers and suppliers to practise exit or voice.

It is thus necessary to study buyer-supplier relationships from the exit-voice approach to

get a better understanding of which strategy needs to be followed by firms to get the best

out of the relationships they have in the supply chain.

2.5.3 Opportunistic behaviour

Opportunism extends the conventional assumption that economic agents are guided by

considerations of self-interest to make allowances for strategic behaviour. This involves

self-interest seeking with guile and has profound implications for choosing between

32


alternative contractual relationships (Williamson, I 975). According to Jap (2001)

opportunism includes overt behaviours such as lying, cheating and stealing, as well as

subtle behaviours such as dishonouring an implicit contract, shirking, failing to fulfil

promises, and obligations. It is the equivalent of bad faith, the implication being that the

party who is opportunistic is not trustworthy. Opportunistic behaviour involves one partner

either having access to information that the other partner does not have and then taking

advantage of the information asymmetry to gain business advantage. Specific assets can

create a complex pattern of interdependencies between supplier and buyer making it

difficult to assess the bargaining power of each one. Instead, given a context of small

numbers, asymmetric information and uncertainty about the future, there will be incentives

for opportunistic behaviour by both parties. A variety of behaviours can occur between

partners, some may involve opportunistic jostling to acquire more power for one

organisation or the use of power to get some desirable end result for one partner.

Opportunism may involve misrepresentations ( ego Making hollow promises or ''window -

dressing" one's efforts), unresponsiveness (eg. Aloofness), unreasonable demands (eg.

Asking the other party to pay more than their fair share of a problem) and lying ( Jap,

2001).

As a buyer and supplier become increasingly SUSpICIOUS of each other, there is a

decreasing motivation to make the exchange successful through co-ordination efforts and

idiosyncratic investments. The activities typically require the sharing of sensitive

information in order to identifY opportunities for joint success (lap, 2001). If any of the

parties are suspicious of opportunistic behaviour the information sharing stops and

exchange deteriorates. Lorange and Nelson (l987) suggest that when exchange

deteriorates, behaviours such as tolerance of incompetence, replacement of substance with

form, scarcity of clear goals and decision benchmarks, and loss of effective evidence are

evidence of some of the first observable signs of decline. This also means that the decline

in the relationship on a macro level is affecting two firms, but on a micro level is actually

affecting and getting affected by the individual humans working in the representative roles

of buyers and suppliers.

Hence, it is even more important to explore the buyer-supplier transaction scenario from

the perspective of the humans who are working in those roles.

33


Sandy Jap (1999, 2001) has explored the mechanisms of governance that control

opportunistic behaviour although they may not control the inappropriate use of power.

According to Jap, what tends to limit opportunistic behaviour between parties are: Trust,

bilateral investments and shared goals. If the agents in the transaction have established

trust over a prolonged period of time then this tends to limit the opportunistic behaviour

and encourage more open communication. Similarly if they have bilateral and shared

investments in the outcome of the collaboration and they have shared goals about

outcomes then this limits the opportunistic behaviour. The application of power applied

appropriately to define rules of partnership or inappropriately to gain advantage in a

problem situation is not always the same as opportunistic behaviour. Although

opportunistic behaviour particularly if successful is likely to change power relationships.

2.5.4 Unethical Behaviour

There are two major current philosophical traditions in business ethics. One is deontology

and the other utilitarianism. In deontology, an activity could be defined as ethical if it is

freely undertaken, available to all, injures no one, and benefits some. Based on this

definition, activities such as writing specifications that favour a particular supplier,

overestimating demand to gain volume concessions, and purposefully misleading a

salesperson in a negotiation are considered unethical behaviour.

In Utilitarianism, an activity is considered ethical and morally acceptable if a social cost!

benefit analysis yields a positive net result. Thus, activities that may hurt some parties are

still considered ethical under this approach, because society as a whole benefits (Fitzsche

& Becker, 1983; Robin & Reidenbach, 1987; Carter, 1998).

Carter in his study defined Unethical activities as "the specific set of actions taken within

the buyer-supplier relationship that are considered unacceptable, inappropriate, or

irresponsible by purchasing managers H. Even though his definition takes into account only

the buyer side of the relationship, it holds true for the marketing personnel from the

supplier's end.

The study by Carter revealed the following activities that could be considered Unethical:

34


a) Deceitful Practices: This first category consisted of behaviors involving deception, and

included survey questions addressing the following activities:

-Purposefully misleading a salesperson in a negotiation

-Exaggerating the seriousness of a problem to gain concessions

-Using obscure contract terms to gain an advantage over suppliers

-Inventing (making up) a second source of supply to gain competitive advantage.

b) Subtle Practices: The second category of unethical actions included somewhat more

subtle activities such as:

-Writing specifications that favor a particular supplier

-Allowing personalities of suppliers to impact decisions

-Giving preference to suppliers preferred by top management.

A further analysis of the survey data from buying firms suggested that unethical activities

of suppliers consisted of a single set of activities, including:

- Knowingly over committing resources or production schedules

- Lying or grossly misleading customers in a negotiation

- Using obscure contract terms to gain an advantage over suppliers

- Askingfor information about competitors

- Offering gifts in excess of nominal value

-Increasing prices when there is a shortage

-Using backdoor selling techniques such as approaching personnel is engineering,

manufacturing, orother departments outside of purchasing

- Using less competitive terms or prices for buyers who purchase exclusively from the

supplier.

Looking at the literature, there are numerous instances, (Felch, 1985; Trevisaan, 1986;

Van del Hengel, 1995; Janson, 1988; Rudelius & Buchholz, 1979; Dubinsky &Gwin,

198 I; Puffer & Mccarthy, 1995; Husted, et. al. 1996), of Unethical activities identified in

buyer-supplier relationships. Prominent among these are:

35


I. Over-committing resources or production schedules.

2. Increasing prices when there is a shortage of supply of the purchased material or

product.

3. Allowing the supplier to become dependent on the purchasing organisation for

most of its business

4. cancelling purchase orders in progress and trying to avoid cancellation charges.

5. Overestimating demand to gain volume discounts.

6. Concocting a second source of supply to gain advantage over suppliers.

7. Allowing the personalities of the supplier to affect decisions.

Looking at the activities depicted as unethical, it might look as if these activities are

normal and that a company may have to follow any or all of them in order to make profit

and stay afloat. But these are termed as Unethical as they hurt the other party and foster an

antagonistic relationship. The other issue in unethical behaviour is the involvement of

humans in conducting this behaviour. According to Dobler and Burt (1996), purchasing

managers can have a significant influence over a firm's reputation. Because these

individuals interact frequently with suppliers and other upstream channel members, their

behaviour can and does affect how the firm is viewed by suppliers and other outside

organisations. Carter (1998) in his study, suggests that if either the buyer or supplier

perceives the other party to be engaged in unethical behaviour it lends to a feeling of

dissatisfaction from the relationship, and this hampers the relationship in the long-term.

The perception of the other party being involved in unethical behaviour also lends to the

feeling that the other party is not effective in fulfilling the terms of contract. The human

factor has thus a very important part to play in keeping the perceptions right and thus

maintaining the relationship. The external environment also plays a major role in

influencing the employees behaviour. Osborn and Hunt, (1974) have reported that those

parts of an organisation that are most exposed to the outside environment are most likely to

deviate from the firm's behavioural standards, including those behaviours related to ethics.

This seems to suggest that by creating a strong situation in the firm by having strict

guidelines for ethical behaviour can help in reducing the external influence on the

employees. But, Webster (1992); WiIliams, et. a\.(l994) have reported that purchasing

being a boundary spanning function like marketing and sales, and because of it's

interaction with other members of the supply chain, it may be under considerable pressure

to depart from accepted norms of behaviour and ethical standards set by the firm. Also,

36


purchasing personnel who feel a strong pressure to perform might consider certain

behaviours as being less unethical than those firms with less pressure to perform (Carter,

1998). Hence, it is most important to explore the involvement of humans in supply chain

relationships and look for the human perspectives on these relationships.

2.S.S Trust

The need for trust between partners has been identified as an essential element of buyer

supplier relationships (Anderson and Narus, 1990; Geyskens, et.al., 1998; Rousseau, et. aI.,

1998). Morgan and Hunt (1994) reported that trust is a basic requirement in the context of

buyer- supplier relationships. Trust is an important lubricant of relationships. It binds

parties and has an important future orientation (Ganesan, 1994). Trust guides behaviour in

business settings, ,and when trust is operative the risk of opportunism and market

instability is reduced (Morgan and Hunt, 1994; Doney and Cannon,1997). A high degree of

trust between the partners in a buyer-supplier relationship is favourable for co-ordinated

behaviour, whereas low trust leads to competitive behaviour (Anderson and Narus, 1990).

Long- term relationships and trust encourage effective communication, information sharing

and joint pay-offs (Dwyer, et. aI., 1987; Ring and Van den Ven, 1992).Trust significantly

reduces the perception of risk associated with opportunistic behaviour by a partner; it

increases confidence that short- term inequities will be resolved over the long term and

reduces the transaction costs in an exchange relationship (Ganesan, 1994). Liker et. al.

(1995) link the concept of trust to mutual dependency, "Trust as mutual dependence

suggests that each party realizes that it has much to lose by endangering the relationship."

They suggest that the investments made in a collaborative relationship increase the level of

mutual dependency, "customers and suppliers have such high levels of relationship specific

investments that the consequences of violating this trust far exceed any possible short term

gains", as such they believe that trust is a consequence of increased mutual dependency.

Nielson (1998) places the emphasis on goodwill trust, "trust in the industrial buyer-seller

context, has been defined as the firm's belief that another company will perform actions

that result in positive outcomes for the firm, as well as not unexpected actions that would

result in negative outcomes for the firm". In part, trust is therefore an expectation that the

other party will not engage in opportunistic behaviours, but instead will engage in

behaviours (such as increased investment and open communication) that are beneficial to

both the relationship and the organisations involved (Wyatt, 200 I).

37


Trust takes time to build, and is the result of a succession of positive experiences. "A

trustful relationship evolves gradually over time through repeated successful interactions

and requires carefully nurturing through various forms of hard and soft commitments. A

major implication of this is that creating a foundation of trust is a slow, time-consuming

and expensive process requiring significant investment of resources" (Lowenthal, 1995),

cited in Wyatt (2001).

In the context of this research, trust needs a mention because it is important for buyer

supplier relationships. From the individual human in the relationship, building or breaking

of that trust is affecting the individual and the individual is affecting the building or

breaking of the trust. If any negative transactions are conducted repeatedly, it will result in

a spiral of distrust, which will make the relationship flounder. In this section, trust has been

discussed with the intention of making the reader aware that it plays a major factor in the

relationship after the transaction has ended. The result or pay-off of the transaction will

decide whether the trust is building up or deteriorating. Hence, simplistically whenever

supply chain entities conduct any transaction, all that they need to ask is whether this

transaction will help in increasing the trust or reducing it. But most transactions are not

conducted with that frame of mind, and hence, even though this is an important topic, the

researcher limits the discussion to only this section in the thesis.

2.6 The Human perspective

Humphrey and Ashforth (2000), in their study of buyer-supplier relationships suggested

that although buyers are likely to have a preferred style of communication, which is

derived from their personality, their ability to use the preferred style may depend upon the

organizational context. To explain the restriction to freedom of action for the individual the

concept of situational strength has value (Mischel, 1977). Mischel, suggested that the

conditions or "situational variables" of the psychological environment may be

conceptualised as providing the individual with information; this information influences

person variables, thereby affecting how the individual thinks and acts under those

conditions. "Situations" thus influence behaviour by affecting person variables as how a

person encodes the situation, the outcomes he/she expects, the subjective value of the

outcomes and the ability to generate response patterns. He reported that there are two

38

----------- -------


types of situations, that influence the way people behave or take decisions. These

situations are :

I. Strong situation: Strong situations are those in which most actors construe the

situation in the same way, induce uniform expectancies regarding the appropriate

response pattern and provide adequate incentives and skills to respond as per the

pattern ( Mischel, 1977; Mullins and Cumrnings, 1999). In the strong situation the

decision latitude available to the individual is small and the behaviour is largely

prescribed by organization policy or some rule set. This situation can be

conceptualised as red traffic lights where everybody (most at least) know the rules

of the lights and obey them and there are sanctions if they do not (if they are

caught). The ambiguity in the decisions to be made is low and the rule set defining

behaviour is high. Under these circumstances people no matter what their

predisposition, tend to behave in a similar manner under the same stimulus.

However, it would be wrong to say that the individual has no influence on the

situation strength. There is a mutual interaction between situation strength and the

individual disposition to behave in certain ways. For example, an effective manager

may try to engineer the situation so that they personally have considerable freedom

in their decision-making whilst they ensure that the situation is strong for their own

subordinates.

2. Weak Situation: The opposite to the strong situation is the weak situation when

there is high degree of latitude in decision making and the actual decisions that

emerge depend more upon the individual preferred ways of behaving and learnt

script messages. Weak situations are those in which there is ambiguity about the

meaning of the situation and the appropriateness of various responses, where

incentives for any particular response are unclear and where individuals' ability to

respond may vary (Mull ins and Cumrnings, 1999). The situation can be

conceptualised to an amber traffic light. In the case of an amber traffic light, the

situation is weak in the respect that the driver has the choice to stop or go through.

If the amber light come after the red, then the driver knows that it is going to turn

green, hence he/she can go ahead, if it after the green then he/she has to stop, but if

the driver sees only the amber, then the decision to go ahead or slow down is

entirely based on personal disposition. The situation does not define strictly what to

do, there is a certain latitude given in decision making. If the driver is of an

39


adventurous disposition, then he/she will only consider the light to be amber and go

through, whereas a less adventurous disposition will slow down to gauge whether

the light is going to turn red or green before making the decision whether or not

to go through.

One of the key factors which influences the nature of the relationship between companies

is whether its network of distribution or supply acts with a defined and strong interaction

policy. Such a policy results in communication that is not dependent upon the personalities

of individuals within the companies, and the culture, leadership or strategic policy dictates

the nature of the transactions. It would appear that if the situation were strong, the response

to the errant supplier or customer would be to irrespectively apply company policy. It is

also likely that the type of employee in the strong situation company will have adapted to

that strong situation and will not challenge the system. This is not true of the weak

situation where the individual is probably more used to, and accepting of, ambiguity and a

lack of a strong company policy, and is likely to deliver an individual response akin to

their own ways of behaving in the particular situation. Individual differences best predict

behaviour under weak circumstances, while situational variables predict behaviour under

strong environmental conditions (Mischel, 1977). In case of buyer- supplier relationships,

if the situation is strong and the buyer organisation has created strict policy guidelines for

supplier selections and evaluations, it is unlikely that buyers representatives will select

suppliers on non- business related criteria, such as how well they got on or how well they

liked the suppliers representatives.

The concept of using situational strength in organisational settings, raises the question of

the level of discretion employees have in an organisation. The role of discretion has been

explored by Hambrick and Finkelstien (\ 996). Some situations provide managers with

more discretion than others. They theorised that managerial discretion, which refers to

executive's ability to affect important organisational outcomes, is a function of the task

environment, the internal organisation, and managerial characteristics (Carpenter and

Golden, 1997). The perception of the strength of a situation is probably related to the

personality of the individuals and it is likely that certain people that prefer stronger

situations will deliberately select positions where the discretion in decision making is

largely controlled by company policies. In contrast others may prefer weaker situations and

they either engineer the situation or choose the situation to suit their personality. According

40

Review of tire Literature

to Weiss and Adler (1984), strong situations have widely accepted rules of conduct which

constrain and direct behaviour. In contrast, weak situations allow various interpretations

and responses to identical issues. Various researchers have argued that situation strength

moderates the extent to which personality differences affect individual behaviour,

including decision making. Weak situations are those in which personality differences are

most likely to influence decision making and behaviours (Carpenter and Golden, 1997).

Hence in weak situations, employees will tend to perceive to have more discretion than in

situations whose situational strength is high.

Humphrey and Ashforth's (2000) study of buyer supplier relationships from an Exit- Voice

perspective did have some suggestions about situational strength and the effect it has on

buyer-supplier relationships. The discussion has been limited to the individual and how

personal disposition is affected by situational strength. It would thus be interesting to view

the effect situational strength has on buyer-supplier relationships taking into consideration

the power regime, and the issues the individual faces as a representative of the buyer or

supplier. It is possible that for anyone company in an upstream and downstream network,

the situation is strong for some products and weak for others. If, organisationally, this is

true, it will be interesting to determine what, if any, efforts will be made, and by whom, to

change the perceived weak situation into a strong situation.

2.7 Research Focus

The discussion on Supply chain relationships and Power structures does not gIve an

indication as to what really happens in a supply chain transaction. In this case a

Transaction is defined as an interaction, the way in which the communication or transfer of

material or negotiation or any other behavioural response is conducted. The relationship

scenario between the supply chain entities leads to a question: Is there something else

happening in the interaction, other than what is seen to the eye at a social level? Are

organisations capable of showing any sort of Psychological behaviour or is it a function of

the individual humans working in the organisation? What is the complex interaction

between humans and their organisations?

This scenario is discussed by Crozier and Friedberg (1977). According to them,

41


"A given organisational situation never completely constrains an actor( individual human

being). He always retains a margin of liberty and negotiation. This margin of liberty

(signifying a source of uncertainty for his partners as well as for the organisation as a

whole) endows each actor with power over the others, which increases with the relevance

for these others of the source of uncertainty controlled by the actor. This relevance is to be

understood as the extent to which the source of uncertainty affects the capacity of the

other actors to play according to their own strategies. An actor's behaviour can and

should be analysed as the expression of a rational strategy whose aim is the use of power

to increase his " winnings" through participation in the organisation. In other words, the

actor will always try to profit from his margin of liberty by negotiating his participation

and by seeking to "manipulate" his partners and the organisations as a whole so as to

make his participation "pay". "

Since, individual human beings have a very important role to play in how the supply chain

transactions are conducted, it is imperative to study the effect of individual human beings

in supply chain transactions and relationships and look at these from their perspective. The

review done in this chapter has depicted various facets of studying buyer- supplier

relationships, but none of these have considered the human perspective. This research will

explore an area, which has not been written about in great detail. Whether there is any

novelty to the subject area or not can be judged only after the first phase of exploratory

research is conducted. The research objectives for this research have been set out as under:


associated with these transactions particularly from the perspective of behaviours, and




The approach selected for studying these objectives is discussed in the next chapter.

42


2.8 Summary

This chapter has reviewed the different concepts and theories related to supply chains and

buyer-supplier relationships. The review and further discussion has culminated into the

formulation of two research objectives, which will be the focus for the next phase of the

research.

43

Research Approach

Chapter 3

Research Approach

Aim: This chapter presents the different approaches the researcher had to consider in

order to decide the most suitable research approach considering the objectives set out in

the previous chapter. Also, presented is a brief description of how the data was collected

and analysed, followed by a discussion on the implications of the analysed data for this

research.

3.1 Epistemology

An epistemological issue concerns the question of what is regarded as acceptable

knowledge in a discipline. A particularly central issue in this context is the question

whether the social world can and should be studied according to the principles, procedures

and ethos as the natural sciences (Bryrnan, 2004). Easterby-Smith, et.al. (2002) have

defined epistemology as a general set of assumptions about the best ways of inquiring into

the nature of the world. The acceptance of a particular epistemology usually leads the

researcher to adopt methods that are characteristic of that position. Conversely, where a

given range of methods is employed in a particular study it is possible to infer that the

researcher holds, perhaps implicitly, a corresponding epistemology (Easterby-Smith, et.al.,

2002). The gathering, analysis and interpretation of data is always conducted with some

broader understanding of what constitutes legitimate inquiry and warrantable knowledge.

In this respect, the quantity- quality debate has been anchored within two apparently

opposed epistemological positions. The two poles are known as 'experimental',

'hypothetico-deductive' or 'positivist' and the 'naturalistic', 'contextual', or

'interpretative' approaches (Henwood and Pidgeon, 1993). For the discussion on

epistemology for this research, the two positions considered are 'positivist' and '

interpretative' or also known as 'interpretivist'.

3.1.1 Positivism

Positivism is an epistemological position that advocates the application of the methods of

the natural sciences to the study of social reality and beyond (Bryrnan, 2004). The term

'positive philosophy' was coined by the French philosopher Auguste Comte in 1853, and is

44

Research Approach

now known as 'positivism' (Easterby-smith, et aI., 2002, Kolakowski, 1997). The key idea

of positivism is that the social world exists externally, and that its properties should be

measured through objective methods, rather than being inferred subjectively through

sensation, reflection or intuition (Easterby-smith, et aI., 2002). Positivism stands for a

certain philosophical attitude to human knowledge; it does not pre-judge questions about

how humans arrive at knowledge- neither the psychological nor the historical foundations

of knowledge. It is a collection of rules and evaluative criteria referring to human

knowledge: it tells us what kind of contents in our statements about the world deserve the

name of knowledge and supplies us with norms that make it possible to distinguish

between that which may and that which may not reasonably be asked (Kolakowski, 1997).

Easterby- Smith, et aI., (2002) have proposed a number of implications for positivism in

social sciences and management research:

I. independence: the observer must be independent from what is being observed.

2. value-freedom: the choice of what to study, and how to study it can be derived from

objective criteria instead of human beliefs and interests.

3. causality: the aim of social sciences should be to identify causal explanations and

fundamental laws that explain regularities in human social behaviour.

4. hypothesis and deduction: science proceeds through a process of hypothsizing

fundamental laws and then deducing what kinds of observations will demonstrate

the truth or falsity ofthese hypotheses

5. operationalisation: concepts need to be operationalised in a way which enables

facts to be measured quantitatively

6. reductionism: problems as a whole are better understood if they are reduced into

the simplest possible elements.

7. generalization: in order to be able to generalize about regularities in human and

social behaviour it is necessary to select samples of sufficient size, from which

inferences may be drawn about the wider population.

8. cross-sectional analysis: such regularities can most easily be identified by making

comparisons of variations across samples.

3.1.2 Interpretivism

Interpretivism is an epistemological position that advocates the view that a strategy is

required that respects the differences between people and the objects of the natural

sciences and therefore requires the social scientist to grasp the subjective meaning of social

45

Research Approach

action (8ryrnan, 2004). Easterby-smith ,et. al. (2002) have provided a brief understanding

of 'social constructionism' which is another name given to Interpretivism. They mention

that 'reality' is detennined by people rather than by objective and external factors. Hence,

the task of the social scientist should not be to gather facts and measure how often certain

patterns occur, but to appreciate the different constructions and meanings that people place

upon their experience. The focus should be on what people, individually and collectively,

are thinking and feeling, and attention should be paid to the ways they communicate with

each other, whether verbally or non-verbally.

3.1.3 Positivism Vs Interpretivism

Philosophically, Positivism and Interpretivism are poles apart in tenns of how the research

process is conducted. In this section, the researcher will provide details regarding the

difference between the two epistemologies from different perspectives. These have been

adapted from Lincoln and Guba (1985); and Easterby-Smith, et al. (2002). Lincoln and

Guba have compared the two epistemologies with respect to the five axioms important to

the research process.

Axioms About: Positivist Paradigm interpretivist Paradigm

The nature of reality Reality is single, tangible Realities are multiple, and fragmental constructed and holistic

The relationship of They are independent, a They are interactive and the researcher and dualism inseparable the researched

The possibility of Time and context free Only time and context-generalisation generalisations are bound working hypotheses

possible (idiographic statem en ts) are possible

The possibility of There are real causes, All entities are in a shape causal linkages temporally precedent or of mutual simultaneous

simultaneous with their shaping so it is impossible effects to distinguish causes from

effects The role of values Inquiry is value free Inquiry is value bound

Figure 3.1: Positivist and Interpretivist epistemologies. (adapted from Lincoln and Guba,

1985)

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Research Approach

Easterby-Smith, et a!. (2002) provide comparison between the two epistemologies using

eight classical features of positivist research.

Positivism interpretivism The observer IS a part of what IS

must be independent being observed Human Interests are the main drivers 0

should be irrelavant sCIence aim to increase general

Explanations understanding of the must demonstrate causality situation

research gathering rich data progresses from which ideas are through hypotheses and deductions induced

should incorporate Concepts need to be operationalised so stakeholder

that they can be measured Iperspecti ves may include the

Units of analysis should be reduced to simplest complexity of 'whole' terms situations

Generalization through statistical probability theoretical abstractions

small number of cases sampling requires large numbers selected chosen for specific

randomly reasons

Figure 3.2: Comparison between Positivist and Interpretivist epistemologies. (adapted from

Easterby-Smith, et.a!., 2002)

Even though it may seem repetitive, both figures provide a good comparative study of the

two epistemologies. The reason for depicting these comparisons is to make the reader

aware that when the research is designed one of these philosophies is used as a base, which

then detennines the methods for data collection and analysis. Hence, when selecting the

philosophy it is essential to study the research objectives and then decide the most

appropriate epistemology followed by the respective methods. With exceptions in cases,

when the research objectives will demand the use of both the philosophical stances, a

mixed-method approach is designed, but for all other cases, it is either the positivist

approach or interpretivist approach.

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Research Approach

3.1.4 Epistemology and research methods

As discussed in the prevIOus section, the epistemological stance decides the research

methods to use for fulfilling the research objectives. There are many potential choices to

make when developing a research design, and there are a number of resources to guide the

researcher in making the ideal choice, but many of these choices are based on certain

philosophical stances. Hence an awareness of this can at least ensure that the different

elements of the research design are consistent with each other (Easterby-Smith, et aI.,

2002). If the researcher chooses a positivist stance it means that the researcher is looking to

prove the causal relations between variables, thereby testing pre-determined hypotheses,

which can often be taken from existing theories. According to Henwood and Pidgeon

(1997) Quantification and hence quantitative methods are most suited for positivist

research approaches as "quantification ..... renders the concepts embedded in theoretical

schemes or hypotheses observable, manipulable and testable".

As seen earlier in the discussion on interpretivism, the important criteria for following an

interpretivist philosophy are that human interests are the main drivers of science, research

progresses through gathering rich data from which ideas are induced, and concepts should

incorporate stakeholders perspectives. These are not only important, but are important

when comparing the interpretivist research process to the positivist research process.

Unlike, positivist approach the interpretivist has the human at the centre of all activity and

the research approach gets designed around getting the most relevant data from the humans

involved in the study and from their perspectives. Hence, the reduced need for numerical

verification and the emphasis on discovering meaning rather than proving existence leads

to the dominance of qualitative methods in the interpretivist approach. Creswell, (2003)

has defined a qualitative approach as one in which the inquirer often makes knowledge

claims based primarily on constructivist approaches (i.e. the multiple meanings of

individual experiences, meanings socially and historically constructed, with an intent of

developing a theory or pattern) or advocacy! participatory perspectives( i.e. political, issue

oriented, collaborative, or change oriented) or both. It also uses strategies of inquiry such

as narratives, phenomenologies, ethnographies, grounded theory studies, or case studies.

The researcher collects open-ended, emerging data with the primary intent of developing

themes from the data.

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Research Approach

3.2 Research Design

Research design is concerned with turning research questions into projects. The general

principle is that the research strategy or strategies, and the methods, or techniques

employed, must be appropriate for the questions you want to answer (Robson, 2002).

Research designs are about organising research activity, including the collection of data, in

ways that are most likely to achieve the research aims (Easterby-Smith, et. aI., 2002).

Design in qualitative research is an iterative process that involves tacking back and forth

between the different components of the design, assessing the implications of the purpose,

theory, research questions, methods and validity threats (Maxwell, 1996). Maxwell (1996)

proposed a research design framework comprising of five components. The components

form an integrated and interacting whole, with each component closely tied to several

others, rather than linked in a linear or cyclic sequence.

Purposes

Methods

Research Questions

Conceptual Context

Validity

Figure 3.3 : A model of research design ( adapted from Maxwell, 1996)

Easterby- Smith, et. al.,(2002) propose that when designing the research process six key

choices must be made to get the design right. The six key choices are described by them in

detail, but here they are presented only as a depiction of one of the many theories of

research design studied by the researcher.

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Research Approach

Researcher is indeiJendent vs Researcher in involved

larqe samples vs Small numbers

Testing theories vs Generating theories

Experimental desiqn vs Fieldwork methods

Universal theory vs local knowledge

Verification vs Falsification

Figure 3.4: key choices of research design (adapted from Easterby- Smith, et. aI., 2002)

In a qualitative approach, the term design may be misleading. Lincoln and Guba, (I 985)

suggest that even though the term design suggests having a very specific blueprint, design

in the naturalistic sense ..... means planning for certain broad contingencies without,

indicating exactly what will be done in relation to each. Patton (2002), has suggested that a

qualitative design needs to remain sufficiently open and flexible to permit exploration of

whatever the phenomena under study offers for inquiry. He further adds that degree of

flexibility and openness, is a matter of great variation among different designs and

different methods can produce different findings. Hence the questions arising are Which

research design is the best? Or Which strategy will provide the most useful information to

decision makers. The design will hence depend upon the purpose of the study, the

evaluation audience for the study, the interests, abilities and biases of the researchers.

3.2.1 The Qualitative - Quantitative divide

Earlier on in the chapter, the researcher has presented the relation between epistemological

stance and research approach. Even though it may it may feel pretty straightforward when

deciding the research approach, the designing of the research approach warrants the study

of other factors, which help in the final research design. It is simple to decide that since the

epistemological stance is positivist it will be suitable to use a Quantitative approach and if

the stance is interpretivist to use a Qualitative approach. But what exactly is Qualitative or

Quantitative research. Bryman (2004) has outlined the differences between quantitative

and qualitative research. According to him, quantitative research can be construed as a

research strategy that emphasizes quantification in the collection and analysis of data and

that:

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Research Approach

• uses a deductive approach to the relationship between theory and research, in which

the importance is on testing of theories;

• has incorporated the practices and norms of the natural scientific model and or

positivism in particular;

• represents a view of social reality as an external objective reality.

Qualitative research can be construed as a research strategy that usually emphasizes words

rather than quantification in the collection and analysis of data and that:

• predominantly emphasizes an inductive approach to the relationship between

theory and research, in which the emphasis is placed on the generation of theories;

• has rejected the practices and norms of the natural scientific model and of

positivism in particular in preference for an emphasis on the ways in which

individuals interpret their social world;

• represents a view of the social reality as a constantly shifting emergent property of

individuals creation.

Even though these two approaches have been contrasted many times in methodological

publications, the recent trend in research methodology and philosophy is to have a mixed

method approach towards research. This has been argued by Hammersley (1996); 8ryman,

(2004) and many more researchers. There is now a growing divide between researchers

who follow the classical system of research which contains strict demarcation between

quantitative and qualitative and the other group who are proposing the use of either

approach or combination depending upon practicality and research objectives. For this

thesis, the researcher has presented the reader with a very brief account of what constitutes

qualitative and quantitative approaches. For further information on these approaches and

mixed -method approaches the reader may refer to publications by 8ryman (2004);

Creswell (2003); Hammersley (1996); etc.

3.2.2 Epistemology, methods and research objectives

Deciding whether quantitative is better than qualitative or vice versa is not the criteria for

choosing the research approach. Using either of the approaches will result in good research

only if that approach was considered to complement the research objectives and their

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Research Approach

investigation. In this research the investigation is focussed on exploration. The intent is to

explore buyer- supplier relationships and study the dynamics of buyer-supplier transactions

to get a better idea of what really happens and what part the humans involved play in those

circumstances. This cannot be achieved by having pre framed hypotheses and variables

and measuring them using statistical means. The insight can only be sought if the humans

speak about the transactions and delve on the dynamics from their perspectives. The

richness of the data in terms of the information being given out by the transacting entities

without any bounding frameworks will provide a better understanding of the relationships

and also help to discover whether there are any issues which have not been tackled

previously in this research domain.

The Objectives for this phase of the research were set out as :






Conducting further research in order to fulfil the above mentioned objectives stems from

the assumption that there is not enough literature available in the supply chain domain to

explain buyer- supplier relationships and dynamics from the perspectives of the humans

involved. Hence, the need to explore rather than explain. Exploring means probing further

to find out what is happening, seek new insights and ask questions to assess the phenomena

(Robson, 2002). Also, conducting exploratory research suggests the philosophical stance of

interpretivist research and the use of a Qualitative approach. Even though various

researchers have got involved in discussing the Qualitative- Quantitative divide and trying

to prove the best method for conducting research, the researcher feels that for the context

of this research, the best method would be to interact with the people involved in these

relationships and get first hand accounts of the phenomena. This implies the qualitative

approach and a stress more on letting the respondents ponder over incidents and provide

information from their perspective. Implementing a qualitative approach has both its

strengths and weaknesses as put forth by Easterby-smith, et. al. (2002) :

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Research Approach

Stren!!th Weakness

data collection can take up a ability to look at how change great deal of time and Iprocesses over time resources To understand people's The analysis and interpretation meanin!!s of data may be very difficult.

Policy makers may give a low To adjust to new issues and credibility to studies based on ideas as they emerge apparently subjective opinions To contribute to evolution 0

new theories

Figure 3.5: Strengths and Weakness of qualitative research (adapted from Easterby- Smith

et. aI., 2002)

Qualitative research suggests different methods for conducting research, of which the most

common are Ethnography, Phenomenology, Grounded theory and Hermeneutics. Methods

are selected as per research objectives and each will incorporate a certain approach to data

collection and analysis. For this research, the researcher has selected "Phenomenological

inquiry" as the most suitable method. Bogdan and Taylor(1975) summarise the

phenomenological stance, which provides support to the selection of this technique with

respect to the research objectives:

The phenomenologist views human behaviour - what people say and do - as a product of

how people interpret their world. The task of the phenomenologist, and, for us, the

qualitative methodologists, is to capture this process of interpretation .. .In order to grasp

the meanings of a person's behaviour, the phenomenologist attempts to see things from

that person's point of view'

3.3. Research approach

3.3.1 Phenomenological inquiry

The aim of phenomenological inquiry is to understand the subjective nature of 'lived

experience' from the perspective of those who experience it, by exploring the subjective

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Research Approach

meanings and explanations that individuals attribute to their experiences. Patton (2002)

defines such a phenomenological 'focus' quite simply as describing 'what people

experience and how it is that they experience what they experience' . The methodological

implication of this focus on lived experience is that an individual's interpretation of the

experience is an essential part of the experience itself (Patton, 2002).

Van Mannen (1983) provides a description of qualitative approach to research that

resonates clearly with the objectives of phenomenological inquiry:

'It is at best an umbrella term covering an array of interpretive techniques which seek to

describe, decode, translate, and otherwise come to terms with the meaning, not the

frequency, of certain more or less naturally occurring phenomena in the social world' .

Inquiring into the world of lived experience brings its own complexity, and a significant

issue when conducting phenomenological inquiry is the ability to translate the interpretive

accounts that individuals give of their experiences. As Denzin and Lincoln (1994) point

out, 'Subjects, or individuals are seldom able to give full explanations of their actions or

intentions; all they can offer are accounts, or stories, about what they did and why. No

single method can grasp the subtle variations in ongoing human experience' .

A key aspect of phenomenological inquiry, which differentiates it from more positivist and

functionalist methods, is the explicit recognition that any explanations given of phenomena

'are at best "here and now" accounts that represent a "photographic slice of life" of a

dynamic process that, in the next instant, might represent a very different aspect' (Lincoln

and Guba, 1985). It is important to realise that the same person may well interpret things

differently at different times and in different contexts. An individual's perspective of an

event or experience, therefore, can change over time (Bogdan and Taylor, 1975).

Phenomenological research is thus firmly located in a particular context at a particular

time. This reflects the existentialist concern for understanding the human-being-in the

world, where human existence is defined by the current experiential context in which it

occurs(Cope,2003)

One of the defining factors of phenomenological inquiry is that it is firmly located in the

'context of discovery' rather than the 'context of justification' (Guba and Lincoln, 1994).

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Research Approach

Phenomenological inquiry emphasises that theoretical propositions and hypotheses should

be suspended or 'bracketed' in order to describe phenomena from the perspective of those

who experience it. It is only then that investigators can develop an authentic and holistic

appreciation of a phenomenon in its own right, without being influenced by any theoretical

presuppositions about what it 'should' be like rather than what it is actually like (Cope,

2003). For further information on Phenomenological research design, see Groenewald

(2004).

3.3.2 Sampling issues

According to Hycner (1999), "the phenomena dictates the method (not vIce versa)

including even the type of participants." Hence, the type of participants for the research

had to represent some sample for a certain phenomena. In the case of this research the

phenomena under study was "buyer- supplier transactions" and "buyer- supplier

relationships". The participants, i.e. the sample for this research had to serve a specific

purpose, and hence the selection of a sampling technique known as "Purposeful or

Purposive" sampling. Patton (2002) mentions that the logic and power of purposeful

sampling lies in selecting information-rich cases for study in depth. Information- rich cases

are those from which one can learn a great deal about issues of central importance to the

purpose of the inquiry, thus the term "Purposeful" sampling. Patton (2002) further adds

that purposeful sampling focuses on selecting information- rich cases whose study will

illuminate the questions under study. Purposeful sampling is sometimes called purposive or

judgemental sampling. Bernard (2000) suggests that "In judgemental sampling, you decide

the purpose you want informants to serve, and you go out to find some." Patton (2002)

records a number of different strategies for purposefully selecting information rich- cases.

Of these strategies, the one selected for this research is: Criterion sampling. The logic of

criterion sampling is to review and study all cases that meet some predetermined criterion

of importance. Critical Incidents can be a source of criterion sampling (Patton, 2002).

Boyd (2001) regards two to ten participants or research subjects as sufficient to reach

saturation (referenced, in Groenewald, 2004) and Creswell (2003) recommends "long

interviews with up to 10 people" for phenomenological study. The sample size for this

research was 12. Although the sample size has support from previous mentioned

references, a major reason for having such a small sample was the availability of

respondents and the time constraints of this research to interview more respondents. Also,

as said above, the critical incidents served as the sample, hence all the critical incidents

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Research Approach

derived from the 12 interviews served as the data sample. The respondents selected for the

first stage interviews, were automotive dealers, food manufacturing firms, engineering

firms, and distributors. The total number of respondents were twelve firms of which three

firms were from India. Of the three Indian firms, two firms were engineering firms, and

one was a distributor for a "Fast Moving Consumer Goods" manufacturer.

Another data set for the research was data derived from literature. This data set comprised

of research publications (e.g. Carter, 1998); journal papers (e.g. Robson and Rawnsley,

2001); newspaper reports (e.g. Lawrence, 2003; Fletcher, 2003); articles from business

magazines (e.g. Kobe, 200 I; Wincell, 2002; Rigsbee,2000); information reported on web

sites (Anonymous, 2003; McClenahen, 2001) and competition- commissions reports (e.g.

Supermarkets, 2000) . The data from these literature sources was analysed similar to the

data from interviews. Using data from both individual interviews and literature provided a

richer picture of the transactions and buyer-supplier relationships.

3.3.3 Critical Incidents Technique

One way of getting information from interviewees is the Critical Incident Technique which

was proposed by Flanagan (1954). He defines it 'as a set of procedures for collecting direct

observations of human behaviour in such a way as to facilitate their potential usefulness in

solving practical problems and developing broad psychological principles.' He defined

'incident' as any observable human activity that is sufficiently complete in itself to permit

inference or prediction to be made about the person performing the act. He suggested that

for an incident to be 'critical' it must occur in a situation where the purpose or intent of

the act seems fairly clear to the observer and where its consequences are sufficiently

definite to leave little doubt concerning its effect. Flanagan has described the technique is

valuable as it is able to bridge the gap between the observation, and the recording, and

interpretation of the reasons behind the actions (Easterby-smith, et.a!., 2002). They

mention that this technique can be used by qualitative researchers in conjunction with

interviews. Respondents might, for example be asked to track back to particular instances

in their work- lives and to explain their actions and motives with specific regard to those

instances.

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Research Approach

The critical incident technique is a method for coming close to direct observation but

avoiding some of its hardships (Gummesson, 2000). According to Bitner, et. al. (1990)

critical incidents technique generates data with the level of detail and richness that puts the

researcher close to the realities of the process being studied; it is almost direct observation.

It is an inductive method in which no hypotheses are needed and the incidents as they

appear are allowed to form patterns that the researcher can develop into concepts and

theories (Gummesson, 2000). Although, there are various advantages with using critical

incidents, Gummesson (2000) points out a few failings. The author suggests that the

technique will not provide researchers with the same intense feeling of an incident that

they would get through direct involvement and observation; it is still access through

intermediaries and understanding second- hand. Also, the incidents have to be fairly brief

and well defined.

3.3.4 Early Steps in analysis

The research design specified that the data for this research would be collected using the

Critical Incidents technique and review of literature. In the first method, the Critical

Incidents technique uses interviews with the respondents as a method to get data. The

different methods to record data are hand-written or typed field notes, notes dictated after

field contacts, or tape- recordings of interviews. Even though the tape- recordings and

subsequent transcription of the interviews gives a richer and complete data set for analysis,

it is not always possible for the interviewer to tape- record the interview. It could be any

reason from unavailability of recording equipment to denial by the respondents to record

the conversation due to confidentiality. In such cases, when tape-recording is not possible,

the researcher has to rely on field notes, which are made during the interview or after the

interview. The notes made after the interview may suffer from reliability issues as the

researcher has to remember the conversation and also make sure that no bias creeps into

the account. Miles and Huberman (1994) recommend that for qualitative researchers early

data analysis is of utmost importance. They advise that instead of waiting for the data

collection exercise to end before starting the data analysis, it is useful to interweave data

collection and analysis from the start. In studies with only one round of data collection,

these early analysis methods can be useful. They describe a number of methods, that can

be used for early analysis, of which the researcher has chosen two methods to facilitate

early analysis in this research. The methods are:

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Research Approach

I. Contact Summary Sheet

2. Document Summary Fonn

3.3.4.1 Contact Summary Sheet

A contact summary sheet is a single sheet with some focussing or summarising questions

about a particular field contact ( Miles and Hubennan, 1994). The field worker reviews the

written- up field notes and answers each question briefly to develop an overall summary of

the main points of the contact. A sample of the contact summary sheet used in this research

is shown in Appendix 2. A contact summary sheet is usually best filled out as soon as

written-up field notes have been reviewed and corrected. The data on a contact summary

sheet are essentiall y phrases or sentences that the researcher considers to be an answer to

the fonn's questions after the write-up of the contact has been reviewed. There is also a

variation in the fonn of the contact summary sheet, which was considered more useful for

this research. Contact summary sheets, as just noted, can be used in a more systematic way

by applying codes to them. (Miles and Hubennan, 1994). The researcher inserts codes (

themes or aspects) that were applied to the salient points selected from the field notes. This

infonnation can also generate new codes. The Contact summary sheet has a number of

uses:

I. to guide planning for the next contact.

2. to suggest new or revised codes.

3. to help with co-ordination when more than one field-worker is involved in the

study.

4. to reorient the researcher to the contact when returning to the write-up.

5. to help with further data analysis.

3.3.4.2 Document Summary Form

Miles and Hubennan (1994) suggested the use of a data representation fonnat known as

"Document Summary Fonn" to facilitate recording of data derived from various

documents referred to by the researcher. Documents are often lengthy and may need

clarifying and summarising. It is important for the researcher to know the significance of

the document and the infonnation represented in it. It helps to create and fill out a

document summary fonn, which can be attached to the main document for further analysis.

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Research Approach

The fonns can also be coded, for later analysis and also for rapid retrieval of data when

required.

3.3.5 Issues of Validity

Qualitative methods have often been subject to criticism regarding their validity and

reliability. With regard to validity the complexity and depth of the information generated

makes it hard for an outsider to assess true validity of qualitative research. lanesick (1994)

is one of a number of qualitative researchers who replace the emphasis on validity with an

emphasis on credibility. "Validity in qualitative research has to do with description and

explanation, and whether or not a given explanation fits a given description. In other

words, is the explanation credible?" Hammersley (1996) mentions that qualitative research

should not be evaluated in tenns of validity criteria that have evolved for the assessment of

quantitative research, since these have different epistemological priorities and

commitments. Lincoln and Guba (1985) and Guba and Lincoln (1994) are critical of

applying validity and reliability standards of quantitative approaches to qualitative

approaches as the quantitative approaches have a view that there are absolute truths about

the social world and that it is the job of the social scientist to reveal. Instead, they argue

that there can be more than one and possibly several accounts of a phenomena.

Hammersley (1992) takes a stance midway between quantitative and qualitative validity.

For Hammersley, validity means that an empirical account must be plausible and credible

and should take into account the amount and kind of evidence used in relation to an

account. He proposes that the a researcher is always engaged in representations or

constructions of the social world, and hence the plausibility and credibility of a

researcher's "truth claims" then become the main considerations in evaluating qualitative

research. Hence, according to Hammersley (\992), an account can be held to be 'valid or

true if it represents accurately those features of the phenomena that it is intended to

describe, explain or theorise'.

In the context of this research, the representation of the phenomena was hence sought

through the depiction of 'critical incidents' which fairly represented buyer- supplier

transactions and which provided insight into their relationships. Also, the choice of the

research approach and the methods used in data representation and analysis provides

greater support in making this research valid.

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Research Approach

Hammersley, also suggests 'relevance' as an important criterion of qualitative research.

Relevance is assessed as the importance of a topic within its substantive field or the

contribution it makes to the literature on that field.

In the context of this research, the review of the literature on buyer- supplier

relationships in chapter two, provided the relevance of this topic. Also, the contribution

of this research to the jield of buyer-supplier relationships as depicted at the end of this

chapter and in chapter jive and chapter six, makes it a relevant topic.

The only aspect in which the researcher has failed in terms of the validity criteria, is the

use of a process known as 'member validation'(Hammersley, 1996). It is one of the

validation techniques for phenomenological inquiry. In this technique, the researcher takes

the analysis of the responses back to the participants to enable them to check or comment

upon the interpretation. In the context of this research, it was not possible to go back and

have discussions with the interview respondents.

3.4 Interview Synopsis

For this research, there was no clear cut sampling done for the first stage. The important

aspect was to get first hand information about the transactions, hence this information

could be sought from any person who worked in the purchasing or sales function. The

issue of segregating respondents into industry sectors or functional categories was avoided

at this stage as, apart from the research objectives and a few literature references there was

no clear cut information about the psychology of the relationships.

The respondents selected for the first stage interviews, were automotive dealers, food

manufacturing firms, engineering firms, and distributors. The total number of respondents

were 12 firms. Some of the interviews were conducted by the researcher himself and some

by other researchers in the project group. This would lead the reader to believe that this

method of data collection would have brought in bias in the data collected and the final

analysis. The researcher accepts that this was not the best way to conduct the interviews,

but the time constraints and the location of the firms made it easier for more than one

researcher to conduct the interviews. The issue of bias and reliability of data is a valid one,

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Research Approach

and it is possible that some bias has crept into the results The interviews were conducted

by giving the respondents a chance to speak about what they felt about their relationships

with their buyer / supplier firms, and the way they conducted these relationships. They

were also asked to comment on any situations (critical incidents), which highlighted their

relationships in the supply chain and the dynamics involved with those particular incidents.

This information suggests that the interviews were structured as the researchers were trying

to find some specific information. The researcher thinks that looking at the research

objectives there had to be some structure to how the interview was going to be conducted

in terms of the topics being covered, hence the researcher had to conduct the interviews

using the previously mentioned techniques even though there was a risk of bias creeping

into the collected data. But there was no structure in the form of a script for the interview

or an order for the questions.

Since the data being collected was sensitive In nature and the respondents were not

comfortable giving names or situations on record, the conversations could not be recorded

and the researchers had to make field notes to record that data. The researcher feels that

this again was not the best way to have conducted the interviews, but there was no other

choice and the bias of different researchers making field notes may have led to some bias

in the results. As explained earlier in the chapter, the representation of the data using

Contact Summary Sheets brought the data under a certain format, which proved useful in

the analysis. But this has not affected the results to a considerable degree, as the analysis

was based on exploration than finding any specific patterns. It was better if there was new

information arriving from the analysis when compared to the literature review. The bias,

which has probably influenced this research is the bias, which is existent in the analysis

stage. The researcher recognises this bias and accepts that there might have been some bias

present in extracting information from the field notes.

3.5 Analysis ofthe data

Since, the interviews could not be recorded and transcribed, for analysis purposes the data

was taken from notes written on the "contact summary sheets" and" Document summary

sheets". The analysis was done as suggested by Miles and Huberman (1994) using the

early analysis techniques and in the same sequence as the interviews were conducted.

Another reason for not having a strict regime for data collection and analysis was that,

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Research Approach

since the research focus was exploring relationship issues from the human perspective, the

researcher was not taking any particular stand from either the buyer or suppliers viewpoint

and hence the randomness of the data in terms of mixing views from both buyers and

suppliers was not a cause for concern. Hycner (1999) cautions that for a phenomenological

approach, the term 'analysis' should not be used to study data. He suggest the term

'explicitation'. The "term (analysis) usually means a 'breaking into parts' and therefore

often means a loss of the whole phenomenon .... [ whereas 'explicitation' implies an] ....

investigation of the constituents of a phenomenon while keeping the context of the

whole"(Hycner, 1999}. Hycner (1999) suggested the explicitation process of five steps for

phenomenological inquiry:

1. Bracketing and phenomenological reduction.

2. Delineating units of meaning.

3. Clustering of units of meaning to form themes.

4. Summarising each interview, validating it and where necessary modifying it.

5. Extracting general and unique themes from all the interviews and making a

composite summary.

With respect to this research, the above mentioned method was used in the following way:

1. In the first step, the researcher has to bracket his! her personal views or

preconceptions from the respondents. Hence, the researcher listens to the

recordings of the interviews to become familiar with the words of the interviewee

in order to develop a holistic view. In this research, since the researcher did not

have any recordings due to previously mentioned reasons, the researcher had to rely

on the field notes and the contact summary sheets to get the complete picture of

what the respondent had said.

2. relevant units of meaning were extracted from each interview. These units were in

the form of quotes, words, critical incidents(as a complete unit}.

3. these units were clustered into themes, which were referenced from the literature

review. Any cluster which did not represent known themes was given a new name.

The data in the field notes was analysed for these themes. The interview data was

studied and where any information pertained to a specific theme, it was registered

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I.

2.

3.

4.

5.

6.

Research Approach

in brackets near it in the field notes. The information depicted in the field notes

was classified using the codes derived from the concepts studied in the earlier

chapter. The major concepts, which were formed in to themes were:

Power

Exit- Voice

Unethical Behaviour

Trust

Situational Strength

Opportunistic Behaviour

The contact summary sheets had codes (Themes) inserted from the initial analysis of

the field notes. Further analysis of the information on the Contact Summary Sheet

broke down the information into new themes, which had not been studied by the

researcher in the literature search. These new themes fonned the starting point for the

next phase of the research.

4. Each interview was summarised for all the clusters emerging from the data. Hycner

(1999) mentions that at this point the researcher returns to the infonnant to

determine if the essence of the interview has been correctly captured, and any

modifications necessary are done. For this research, this step was eliminated as, the

researcher did not have recorded interview data and transcripts from which the

informants could compare.

5. The themes emerging from all interviews were considered and a final summary

made. Any new themes emerging were highlighted.

The data which was derived from the Literature, was analysed using the same method. The

same themes or codes which were used to analyse interview data was used for analysis of

literature data. This infonnation was then transferred to the Document Summary Forms.

The Document Summary Forms were analysed and new themes emerged. These themes

were then compared with the ones obtained from the Interview data and the research focus

was narrowed down for this research.

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Research Approach

3.6 Discussion

The identification of the concepts studied in chapter two was not much of a surprise, as

these concepts are straightforward. Various researchers across the globe, have researched

concepts, which have an effect on buyer- supplier relationships (reviewed in chapter two).

This phase of the research has re-affinned that the 6 concepts mentioned previously in this

chapter play a vital role in the relationships. The data from interviews and literature

depicted that unethical behaviour and opportunistic behaviour had its manifestation in a

power struggle. Although unethical behaviour was a function of organisational climate as

well as individual human behaviour, exit· voice strategies provided the entities with

decision taking ability to depict the behaviour they desired. Situational strength provided

the environment for the depiction of individual behaviour or behaviour as per

organisational policies. The result of these transactions finally showed in the reduction of

trust between the entities sparking a negative tone to the relationship.

The Interviews and literature identified certain incidents during the relationship when there

were changes in the way the transactions were conducted. This meant that in the incidents

that were identified by the respondents a change had occurred in the relationship, either the

power equation had changed or trust had deteriorated, or the relationship had broken. The

analysis generated quotes, explanations, descriptions of the incidents which highlighted the

issues affecting buyer-supplier relationships. The text could not be segregated out to depict

only one concept or theme, as each textual set implied more than one concept. For

example:

I used to supply the big supermarkets directly but when I complained publicly that they

kept CUlling the price, I got de-listed.---- This quote depicts the issues of power, exit-Voice

and Unethical behaviour.

The inconsistencies and methodologies created by the DEM's don't allow us to run our

business properly. They change their initiatives every time they get into trouble. They

Jorce us to change to suit their needs and then if it doesn't have immediate cost impact,

they Jorce the end oJthe initiative, take their money and move on to something else. ----

This text depicts issues of power, opportunistic behaviour, trust and exit- voice.

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Research Approach

Hence, all the textual references have not been depicted here. The important aspect of this

analysis has been that the data has re-affirmed the presence of these issues in the

relationship. But even more important has been the micro analysis of the same text in order

to study whether there are some issues underlying these transactions, which influence these

concepts and have an effect on how the relationship and transactions are conducted.

3.6.1 The New Themes

As seen above, the 6 major concepts (Power, Exit-Voice, Unethical Behaviour, Trust,

Situational Strength, Opportunistic Behaviour) covering the buyer- supplier relationship

domain have been identified by the data collection and analysis process conducted by the

researcher. This though a useful confirmation does not contribute much to the already

existing knowledge on buyer- supplier relationships. But, when the researcher analysed the

data again, he found two new themes emerging from the analysis. On a macro level the 6

mentioned concepts were the major influencers on the relationship, but analysing the data

on a micro level, revealed that there were two processes, which were supplementing the

macro level processes. These were in one way influencing the relationship even further.

The two new themes recognised are:

I. Game-like behaviour

2. Discretion, humans have in the relationship

The reason the first theme has been named game- like behaviour is that the transactions

occurring between buyers and suppliers as depicted in the interviews and literature are

similar to series of steps played in a game such as Chess. Even though the series of steps

may be termed as strategy or even business games (Ghemawat, 1997 ) they are in fact

more than calculations or mathematics as the behaviour is being depicted by the humans

who are in the relationship. Hence, these transactions are not termed Games, but Game

like behaviour, which takes into account the involvement of the humans and the behaviour

shown by them. The second theme is that of "Discretion, humans have in the

relationship". This looks at 'to what level does human behaviour influence the

relationship'. It is not only the influence of human behaviour, but more of whether humans

have any role to play in the relationship. What the researcher means by this statement is

that as discussed in chapter two, looking at the concept of situational strength, is there a

weak situation when the humans actually have the power to influence the relationship or

65

Research Approach

does the transaction occur only under strong situations created by the two organisations?

This is tenned as Discretion, the humans have, which translates very simply into whether

there is a strong or weak situation. Even though the concept of situational strength was

introduced in chapter two, there was a dearth of literature on the use of that concept in

buyer- supplier relationships, hence this theme has been suggested as a new theme, since

the data analysis has revealed some insight into this issue. The next chapter will delve in

greater depth into these topics. In this chapter, the objective is to show the reader how the

two themes have emerged.

On analysis of the interviews and literature cases it was strikingly clear that even though

the data showed overtly issues of power, the underlying themes in the power domain were

that of game-like behaviour and human discretion. Most of these instances though

depicting power, also give insights into unethical behaviour. This can be understood from

the following instances:

"We get commitmentfrom top management but the program gets derailed at the operations

level. "

"The partnership is conceived at the executive level but the lower level departments are

never convinced that it is in their best interests too. "

"The ~EM's say they are easy to deal with. All the top- level guys say that and they

believe it. But it's inconsistent with what their people implement. The lower levels don't

have the same balance and perspective as the higher-ups. But I would suggest that is not

unintentional. They have created a labyrinth that you can't get through. Trying to do

business with the rank- and-jile is a nightmare. "

"The power of the multiples, and especially of young buyers, without experience is

frightening. They have the power to dictate prices and margins, display or not, allocate

space and threaten covertly. It's why we would never allow more than 15 % of turnover to

be supplied to multiples. "

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Research Approach

"It's another example of the multiple CEO's showing great sympathy for the farmers

plight, yet purchasing executives further down the supermarket teams seem to be making

their own rules. "

"Multiples switch their buyers around every six to twelve months in order that

relationships and loyalty to suppliers can be avoided. The new buyer is given carte

blanche to de-list suppliers, who are frequently treated with complete contempt. "

"Banham adds that they manufacture "phantom bids" at online auctions to drive down

prices paid to the supplier. "

"It really doesn't maller if an OEM needs cost cuts immediately. Because the arbitrary

approach is a gaming approach and suppliers will learn to play faster then the OEM.

There are more suppliers to gang up on automakers and the program will become

adversarial. Then everybody loses. "

In one instance (Carter, 1998) it was revealed that human behaviour tends to support the

propagation of unethical behaviour- the type or purchasing manager who will tend to rely

heavily on deceitful practices will use these regardless of the amount of training he

receives: "It's a personal inadequacy that's rewarded by short-term recognition but long

term failure." Even though this mayor may not be a generic case, the underlying

assumption is that if the organisation creates a weak situation for the humans who are the

representative in the relationship, human personality may dictate the way the human

behaves during that transaction. Another instance for the depiction of human behaviour is :

purchasing managers experiencing high pressure to perform may be more likely to engage

in unethical practices, such as using obscure contract terms or exaggerating the

seriousness of a problem when doing business with a supplier, in order to achieve price

concessions and meet performance goals and expectations.

Exit strategies are used by buyers and suppliers in the relationship in order to gain power

and this may be reflected by the gaming approach they inculcate or if the situation is weak

it may be shown due to individual human behaviour. In the interview data it was clear

during a number of occasions that the buyer threatened exit if the supplier did not accept

the terms and conditions set by the buyer. This has also been reflected in the literature data.

Some of the instances are as follows:

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Research Approach

I used to supply the big supermarkets directly but when I complained publicly that they kept cutting the price, I got de-listed.

You have to pay for the stickers advertising the promotion. You have to take the loss

because if you drop out they won't allow you back when the price goes back to the proper

level

In a typical transaction between a buyer and supplier, if the buyer is powerful, he will put

some conditions on the supplier and then pressurise the supplier to accept by threatening

to go some other supplier

The instances depicted are but a representation of the different views that buyers and

suppliers have expressed about their relationship in the interviews and literature cases. The

interview data being mainly field notes are mainly represented as a series of the processes

involved in the transaction. A few examples of gaming behaviour from the interviews are:

• On many occasIOns the buyer gives the wrong order or has surplus inventory as

business drops, so the purchasing department of the buyer rejects material on quality

grounds even though it is of good quality. Supplier has to accept and even pay for

transporting rejected material back to the supplier works, as thc buyer is powerful.

Sometimes the supplier gets even- the supplier takes back rejected consignments and

holds it in stock because he knows that the buyer will have a shortfall in a couple of

months and then when the buyer requires more quantity in a short time, the supplier

sends rejected consignment and buyer has to accept.

• In another case, when the buyer has wrongly rejected the consignment on quality

grounds and the supplier is aware that the consignment is perfect in quality, the

supplier keeps postponing getting back the consignment. When the buyer faces a

shortfall, the buyer accepts rejected material and sends a letter saying that it is only

this time that they will accept the rejected material due to a very small deviation, but

will not accept at a later stage. The supplier knows that this situation may occur hence,

uses this ploy, to save money on transportation and inventory holding costs. This case

repeats frequently.

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Research Approach

• In one more case, supplier has contacts in the buyer firm and gets information when

the actual shortfall will occur, so the supplier keeps rejected material locally near the

buyer and when shortfall occurs sends it to the buyer at an inflated price.

• In this transaction, the names have been changed. X is a supplier to Y. While

negotiating for the business, X agrees to the terms set by Y. After they get the business

and both parties are locked in, it uses some costing tools to prove that the costs

incurred are more and that Y should permit them to increase the costs of the

components supplied to Y. Since Y is locked into the agreement, and dependent on X

for that period it gives in.

• The Purchasing manager of a large automotive manufacturer highlighted some of the

game-like behaviours occurring during Electronic reverse auctions,

1. The supplier quite deliberately bids very low knowing that they can lock the buyer in

once the supplier has been accepted and they have gained control of the buyer's

tooling and some other resources.

2. The buyer attempts to exert some power on an incumbent supplier by forcing it to take

part in a reverse auction. This is to pressurise it to reduce price.

3. The suppliers form an arrangement between them to decide who will get the order

and then distribute the work between them.

4. The buyer bids for its own work unknown to other suppliers forcing the price down.

The major game-like behaviours identified from literature sources are:

1. Exaggerating the seriousness of a problem to gain concession.

2. Using obscure contract terms to gain an advantage over suppliers.

3. Inventing a second source of supply to gain competitive advantage.

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Research Approach

4. The inconsistencies and methodologies created by the OEM's don't allow us to run

our business properly. They change their initiatives every time they get into trouble.

They force us to change to suit their needs and then if it doesn't have immediate

cost impact, they force the end of the initiative, take their money and move on to

something else (Kobe, 200 I)

5. The tier I are not getting stronger as many people think. Their asset intensity that

they have assumed for the OEMs has given the OEM even more leverage. Once the

automakers get you in a situation where you have a couple of billion dollars spread

across the globe and you are a huge module supplier, you will do anything they

say( Kobe, 200 I)

6. Increasing prices when there is a shortage.

7. Knowingly over-committing resources or production schedules.

8. Using less competitive terms or prices for buyers who purchase exclusively from

the supplier.

9. Concocting I making up a second source of supply to gaIn advantage over

suppliers.

10. Purposefully misleading the other party.

11. Overestimating demand to gain volume discounts.

12. Cancelling purchase orders in progress and trying to avoid cancellation charges.

13. Allowing a supplier to become dependent on the purchasing organization for most

of its business.

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Research Approach

3.7 Summary

In, this chapter, the researcher presented the methodology for the preliminary data

collection and the findings from the analysis of the data. The data analysis of the

preliminary data from the unstructured interviews and literature highlighted certain themes

in buyer- supplier relations. Some of these themes already have a vast research knowledge

associated with them, but there are some findings, which the researcher believes have not

been studied in relation to buyer- supplier relationships. The analysis of the data in stage I

has provided additional insights into two new issues other than the ones already researched

by various researchers across the globe. One of the issues has been that of the presence of

humans in the relationship and the discretion the humans have for the relationship. The

aspects of discretion identified in the analysis have been focused on individual discretion

or organisational discretion, whether the individual has the freedom to take hislher own

decisions or whether hislher decisions are controlled by the organisations. This has been

reported in the paper written by Mullins and Cummings (1999), Carpenter and Fredrickson

(200 I). Another issue highlighted has been that of rational processes conducted by

organisations or individuals depicting game-like behaviour. This is another important issue

as it has it's base in one or all three of the issues mentioned above, but the manifestation of

the issue is through a series of thought out processes leading to the pay-off.

Hence, as per the analysis the two new issues to research further are:


• Discretion, humans have in the relationship

The next stage of this research will study this aspect in further detaiL It is not only relevant

to study the new themes identified individually, but it is necessary to study whether these

two themes influence each other in any way and if the other themes identified in chapter

two also have some influence on these two themes and eventually on buyer- supplier

relationships.

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PsycllOlogical Implications

Chapter four

Psychological Implications

Aim: The aim of this chapter is to present an argument to consider human elements in the

supply chain in order to study supply chain relationships in detail. The introduction of

human elements warrants the study of these relationships from a psychological perspective

and the chapter then delves into aspects of transactional analysis and presents a case to

use transactional analysis tools to depict the supply chain transactions.

4.1 Introduction

This chapter will dwell on the new issues identified in the earlier stage of the research. The

aspects of game-like behaviour have been studied for a long time through game-theory.

The issue of humans and games has been considered in the field of psychology under the

concept of Transactional analysis. Though the concept has a very different underpinning

than the game-like behaviour shown in buyer-supplier relationships, the researcher has

found similarities and has presented in this chapter the rationality for studying buyer

supplier relationships using Transactional analysis.

Regarding the second issue of human discretion, the researcher has made a case of using

another concept from the psychology discipline, "Situational Strength", which will be also

be discussed in this chapter. The researcher from here on, makes a case for using these two

concepts in studying buyer-supplier relationships. These concepts are not depicted as a

panacea for buyer-supplier relationship problems, but are presented as important methods

to identify problems and improve relationships in a holistic approach taking into

consideration all the other factors associated with buyer-supplier relationships.

4.2 Games

"A game may be defined as a situation in which the outcomes of two or more persons in

interaction are conjoint and the persons are not certain which outcome will occur."

(Tedeschi, et. aI., 1973). Games are a part and parcel of social and working life. As defined

above, the persons involved in the interaction are not certain about the outcome, depicts the

72


complex nature of the situation. How the interaction occurs and what are the other factors

influencing the interaction decide the outcome. According to Crozier and Friedberg (1977),

" the game is much more than an image; it is a concrete mechanism which men use to

structure and regularize their power regulations. while leaving these relations- and

themselves- free." They further add that, " instead of considering the functioning of an

organisation as the result of various adaptive processes in which a collection of individuals

or groups with their own motivations adjust to the procedures and "roles" laid down in

advance by the organisation, we propose to consider it as the result of a series of games

participated in by various organisational actors. By defining the possibilities for gain and

loss, the formal and informal rules of these games delimit a range of rational, or "winning",

strategies, which the actors can adopt if they wish their involvement with the organisation

to serve, or, at least, not to disserve, their personal aspirations."

4.2.1 Why study Games?

As seen earlier, power structures give rise to a scenario, which could have four different

possibilities for the buyer-supplier relationships. The relationship strategies viz. Exit or

Voice and situational constraints such as strong and weak again govern these relationships.

But the question that arises from all this information is that where does this lead to. These

factors are an effect of how the firm is i.e. the culture of the firm, the evolutionary script,

the values, vision, policies, which primarily bring out the psychology of the firm. Any firm

in order to insure its survival with respect to the external environment goes through a

process way beyond the external boundaries in the form of business strategies or in other

words, business games. As per Gabriel (1994) many different games are played

simultaneously in organisations in a variety of arenas. The players often try to define rules

to suit their own interests. Games account for a lot of time and resources and they are

directed towards getting the required pay-off.

The pay-off could be in the form of monetary gains for one entity; or the reconfirmation of

the life-script (culture, values and life history) of the firm or the psychological pay-off to

the person involved in the transaction. Some of the games are played knowingly as

strategies while some are conducted un-knowingly as effects or by-processes of other

transactions. Sometimes, in business and professional games, real ulterior motives emerge

which seriously impair the health and welfare of the transacting firms and the people

73


involved with them (Poindexter, 1975). In examInIng inter-organisational games the

researcher is concerned with interpersonal and professional transactions in supply chains,

transactions, which are motivated by good intentions and maintained by the honest

endeavours of people who unknowingly support a basically faulty premise. These games

result in unresolved conflicts and a growing need for more effective services. Since these

mounting problems are usually the concern of top administrators who failed to do the job

in the first place, the neglected recipients continue to believe they are coping with

adversity rather than games their leaders play. Problems do arise because some people in

responsible positions have faulty judgement or ability, but too many of their foul-ups are

due to games, well- intentioned but dishonest encounters that go under the name of

business and professional services. Some services are overtly dishonest, others are the

result of games and the inability of people to perform (Poindexter, 1975). There could be a

debate as to whether the games being played are individual or organisational. Berne,

(\963) wrote that the individual is willing to resign his own games in favour of playing it

the group's way. The organisational or group game is more than the sum of individual

game players. (Summerton,1993)

There could be another debate about the use of studying the games and the outcomes

involved. The rationality for studying these game -like behaviours is that a dysfunctional

situation arises when the interactions lead to a spiral of distrust where both organisations

feel that they are not winning in the current climate or alternatively, where problem

situations are not being adequately resolved to reach a solution that provides joint benefit.

To achieve such solutions demands the ability to stand clear of the transaction dynamics

and take less obvious alternatives. Sometimes, a third party can spot the transaction

problems and recommend courses of action to side- step the current rnindset.

The study of games or game-like behaviour can be undertaken by two approaches:

I. game- theory 2. Transactional analysis

Following is a brief discussion on game-theory:

74


4.2.2 Game Theory

The study of conflicts of interests concerning management problems has been reported by

various researchers. Jean- Pierre PONSSARD (1981) distinguishes four approaches for

studying conflicts of interest in management problems:

1. The "economic" approach: One of the aIms of economics is to analyse the

efficiency of the production and distribution of goods and services.

2. The "sociological" approach: Sociology concentrates on studying function,

structure and organisation of various distinct bodies such as the civil service, the

firm, ethnic groups etc. the observed behaviour- patterns could then be interpreted

in terms of individually motivated decisions, which are nevertheless explainable in

terms of socially determined collective behaviour norms.

3. The "psychological" approach: psychology operates primarily at the individual

level. The behaviour of an individual is interpreted in terms of personal history.

The decisions, which he takes, often conceal hidden motives and meanings, which

play a decisive role in professional life.

4. The "game theory" approach: in this approach various parties are engaged In a

deciding role and they are aware oftheir objectives and the restrictions under which

they have to operate. They are also capable of analysing the positions of other

players, and last but not the least, they are able to perceive and implement an

overall strategy.

In terms of this research, looking at the four options, the option three "psychological

approach" looks to be the most suitable, but option four" game theory" requires further

study before it can be discarded.

Game theory was probably born with the publication of The Theory of Games and

Economic Behaviour by John von Neumann and Oskar Morgenstern in 1944. (Hargreaves

Heap and Varoufakis, 1995). They defined a game as any interaction between agents that is

governed by a set of rules specifying the possible moves for each participant and a set of

outcomes for each possible combination of moves. Game theory is one of the most widely

used tools in every walk oflife, be it Politics, business, or any kind of social interaction, in

order to study interactions and strategies between people and organisations. Hence, there is

no dearth to finding publications and references to study this tool in detail. The researcher

75


is looking for an insight whether "Game Theory" can be used in the context of this

research and hence, is interested in studying the philosophical underpinnings of this

concept. The researcher therefore does not provide any details about the techniques of

"game theory" , which will be available to the reader from any good reference book on

Game Theory ( for eg: see Hargreaves Heap et. al. 1995; Ghemavat, 1997; Tedeschi, et.al.

1973; Dixit and Skeath, 1999; etc.). Following is a discussion on the philosophy of game

theory and whether it is a suitable tool for this research.

There is no debate about the usefulness of "Game theory" in the wider area on social

interactions involving processes of decision- making and solving economic, political or

business problems. The bone of contention is the usefulness of "Game Theory" in studying

social interactions, which are predominantly governed by human behaviour. RumeIt ,

Schendel and Teece (1991) cite several specific problems, from a business- strategic

perspective, with game theory.

I. knowledge about the strategic phenomena to be studied is outside the scope of

game theory and game theorists are generally unwilling to learn much about

business, leaving a leading role for strategists who identify phenomena worth

studying

2. game-theoretic analyses focus on explaining the possible existence of interactive

effects rather than analysing their practical importance.

3. game- theorists model strategic phenomena, in a way that focuses on a minimal

number of economic variables to the exclusion of others- psychological, political,

organisational and technological which limits scientific testability and practical

utility.

There are a few more, but the most important for this research have been presented here.

Tedeschi, et. al. (1973), have commented upon the difference between games studied using

Transactional Analysis and game theory. They have concluded that it was necessary to

build a bridge between the technical (game theory) and non-technical (transactional

analysis) approaches. They suggested that along with the more fonnal and technical

aspects of the game, it is important to examine the strategies that people use in attempting

to manipulate others, including the application of force, deception, and impression

management.

76


In the context of this research, it was decided to study the feasibility of Transactional

analysis in studying and analysing buyer - supplier transactions and relationships because:

I. It was not in the scope of this research to formulate a new method by bridging two

concepts (game theory and Transactional analysis) together to study buyer- supplier

transactions. Though this would prove beneficial in the future if there is enough

time to do it.

2. Looking at the research focus and the objectives, the researcher was more

concerned about the human and organisational behaviour (collective human

behaviour), hence if only one method was to be selected, then referring to the

different methods suggested by Jean-Pierre PONSSARD (1981), the

"psychological" method and in this case, Transactional analysis would be the most

suitable.

4.2.3 Is there something else happening in the relationship?

The new perception of the relationship raises a very important question about the role of

the individual in the relationship. Organisations do have a culture of their own, but this

culture again is the script given to them by either the founder persons or the people who

control the working of the organisation. The culture is permeated throughout the

organisation through the policies and the rules and regulations set in the organisation. This

does not mean that every individual operates in the same manner. Under a broad umbrella

of the policies each individual works as a part of the same culture but by operating in a

manner he feels is right as per his perception of the culture. This is a major point to

consider when supply chain entities transact. Do the ego states of the persons transacting

come into existence or is it really the ego state of the organisation. The assumption here is

that the ego state of the organisation decides to play the game and transmit a certain

psychological undercurrent in the interaction; but the way the game is played is decided by

the script and ego state of the individual.

The network of interactions involve relationships some transitory and some more

permanent both inside the company and external to it. Many of these regular transactions

take place at a factual and non-psychological level involving simple day-to-day

transactions. However others occur at a deeper level, known as deep structure games

(Frost, 1987) during negotiation or if there is a problem situation or if there is a risk of

opportunistic behaviour.

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P~ychologicallmplications

In situations of opportunistic behaviour or inappropriate use of power there is still the issue

of how both parties in the relationship choose to behave. In this sense behaviour is defined

as a sequence of actions that an individual within a company carries out in response to a

situational stimulus. The personal disposition of the individual is likely to be very

important in determining the behaviour in the relationship. The person will exhibit

preferred ways of behaving which may be more evident in stressful situations ofresolving

problems or delicate negotiations. No matter what the individual predispositions to behave

in certain ways, the situation the person works in may control the response. The work

situation is very different to the intimate relationship. At work people are within a

hierarchy of power relationships, people progress in the organisation by meeting appraisal

targets, the organisation they work for is efficiency oriented and the individuals work to

targets. These and other differences have been explained by Neuberger (1996).

The transactions that take place between people that represent two organisations in the

supply chain are likely to be significantly different from psychotherapeutic relationship

transactions. In the collaborative network the amount of interaction between partners or

buyers and suppliers is less frequent, less intimate but more strategic. In the network both

parties represent their own interests and depending upon resource availability and scarcity

exert some power to maximise their own situations. In the network, contact is at many

levels, different managers may be involved with different intensities of transaction and in

addition the responses of small firms may be very different from those of larger firms. In

reality larger firms may seem to present a stronger situation than smaller firms where more

individual discretion exists.

This requires a study of what happens in a transaction and a tool, which is widely used in

human psychotherapy is Transactional Analysis. It is thus relevant to study the tool and

establish whether it could be applied to organisational transactions. It is relevant to use

Transactional Analysis, as the theory itself has a detailed study of psychological games that

Humans play with each other, and hence intuitively it could be the tool used to study

human behaviour in supply chain transactions. But, this will need further study of the

theory itself and feasibility whether it is suitable for the research domain the researcher

needs to use it for. Following is a brief introduction to the theory of Transactional

Analysis.

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4.3 Transactional Analysis (TA) - An Introduction

The following is a brief introduction to the subject of Transactional Analysis, and is a

compilation of information taken from various books on Transactional Analysis. The

reason for this introduction is more of an understanding of what TA is all about and the

components of TA. The information is taken primarily from Stewart and Joines (1999), but

also has some references from Barker (1980) and Jongeward (1976) .

4.3.1 The development Of Transactional Analysis

Transactional Analysis was developed by Dr. Eric Berne, a psychiatrist in California in the

1950's. In 1949, Berne published the first of six professional journal articles concerning

the nature of intuition. Until 1958, these six papers presented the emerging ideas on which

Berne founded his development of Transactional Analysis. In the articles on intuition that

Berne published in 1957, he first presented his concept of Parent, Adult and Child ego

states and used the term "structural analysis". Berne then went on to write a further paper,

which he presented to the American Group Psychotherapy Association in November 1957.

It was entitled 'Transactional Analysis: A new and Effective method of Group Therapy'. In

this article, which appeared in print the following year, Berne restated his concepts of

Parent, Adult and Child ego-states and introduced the notions of games and scripts. This

formed the basic framework of Transactional Analysis Theory. In 1958, Berne established

the San Francisco Social Psychiatry Seminars consisting of regular meetings with like

minded friends for the development of Transactional Analysis ideas. It was from these

meetings that Transactional Analysis developed as a new technique for use with groups.

Berne's Transactional Analysis in Psychotherapy, the first book entirely devoted to

Transactional Analysis was published in 1961. it was followed in 1963 by The Structure

and Dynamics of Organizations and Groups. The Transactional Analysis Bulletin began

publication in 1962, with Berne as the Editor. Another important event in the history of

Transactional Analysis was the publication of Berne's Games People Play in 1964. In

1964, Berne and his colleagues decide to form the International Transactional Analysis

Association (IT AA) in recognition of the fact that Transactional Analysis was being

practiced by a growing number of professionals outside the USA. Various people have

played a major part in expanding the theory of Transactional Anai ysis to date and to name

a few these are: Stephen Karpman, Thomas Harris, Muriel James, Dorothy Jongeward,

79


Bob and Mary Goulding, Jacqui Schiff and Taibi Kahler. Games people Play opened the

way for the use of Transactional Analysis more widely, but it wasn't until the publication

of Everybody Wins in 1973, that the first use of Transactional Analysis in organisations

was described in a book.

4.3.2 Transactional Analysis

The definition of Transactional Analysis suggested by the International Transactional

Analysis association is " Transactional Analysis is a theory of personality and a systematic

psychotherapy for personal growth and personal change". As said by Thomas Harris

(1973), Transactional analysis provided

" a method of systematizing the information derived from analysing these transactions in

words which have the same meaning, by definition, for everyone who is using them. This

language is clearly one of the most important developments of the system. Agreement on

the meaning of words plus agreement on what to examine are the two keys, which have

unlocked the door to mysteries of why people do as they do. This is no small

accomplishment. "

As a theory of personality, transactional analysis grves a picture of how people are

structured psychologically. To do so it uses a three- part model known as ego-state model.

The same model helps us understand how people function- how they express their

personality in terms of behaviour. Transactional Analysis also provides a theory of

communication. This can be extended to give a method of analysing systems and

organisations. Transactional Analysis offers a theory of child development. The concept of

life-script explains how our present life patterns originated in childhood. Within the

framework of life-script, Transactional Analysis develops explanations of how one may

continue to re-play childhood strategies in grown-up life, even when these produce results

that are self-defeating or painful. Transactional thus gives a theory of psychopathology.

Transactional Analysis is used in the therapeutic field for psychotherapy. It is used in the

treatment of all types of psychological disorders, from everyday living problems to severe

psychosis. It provides a method of therapy for use with individuals, groups, couples and

families. Transactional analysis is also used in educational settings. It helps teachers and

learners to stay in clear communication and avoid setting up unproductive confrontations.

It is particularly suitable for use in counselling. Transactional analysis is a powerful tool in

80


management and communications training and in organisational analysis. The research will

try to use this facility provided by Transactional analysis to analyse Buyer-supplier

Transactions and relations. Following is a brief introduction to the various terms and ideas

used in transactional Analysis. The ones relevant for this research have been explained in

more detail.

Transactional Analysis rests on certain Philosophical assumptions. These are statements

about people, life and objectives of change.

The philosophical assumptions of Transactional Analysis are:

People are OK

Everyone has the capacity to think

People decide their own destiny, and these decisions can be changed.

From these assumptions there follow two basic principles of Transactional Analysis

practice:

Contractual method

Open Communication

People are OK: This is the most fundamental assumption of Transactional Analysis is that

People are OK. It means that every individual has worth, value and dignity as people. I

accept myself as me and I accept you as you. This is a statement of essence rather than

behaviour. At times, I may not like nor accept what you do. But always, I accept what you

are. Your essence as a human being is OK with me, even though your behaviour may not

be. I am not one-up to you, and you are not one-up to me. We are on a level as people. This

is true even though our accomplishments may differ. It is true even though we may be of

different race, age or religion.

Everyone has the capacity to think: Everyone except the severely brain- damaged has

the capacity to think. Therefore it is the responsibility of each of us to decide what he or

she wants trom life. Each individual will ultimately live with the consequences of what he

or she decides.

81

Psycllological Implications

Decisional Model: You and I are both OK. We may sometimes engage In not-OK

behaviour. When we do, we are following strategies we decided upon as young children.

These strategies were the best ways we could work out as infants to survive and get what

we wanted from a world, which may have seemed hostile. As grown-ups we still pursue

these same patterns at times. We may do this even though the results are unproductive or

even painful for us. Even when we were young children, our parents could not make us

develop in one particular way rather than another. They could certainly exert strong

pressures on us. But we made our own decisions whether to comply with these pressures,

to rebel against them or to ignore them. For grown-ups, the same is true. We cannot be

made to feel or behave in particular ways by others, or by 'the environment'. Other people,

or our life circumstances, may exert strong pressures on us. But it is always our decisions

whether to conform to these pressures. It is our decision whether we will behave as per the

demands of the environment or rebel. We are responsible for our feelings and behaviour.

Anytime we make a decision, we can change that decision later. This is true of the early

decisions we make about ourselves and the world. If some of these infant's decisions are

producing uncomfortable results for us as grown-ups, we can trace the decisions and

change them for new and more appropriate decisions. People can change. We achieve

change not merely by insight into our old patterns of behaviour, but by actively deciding to

change those patterns.

Contractual method: The Transactional Practitioner and the client take joint

responsibility for achieving whatever change the client wants to make. This follows from

the assumption that both relate on equal terms. It is not expected for the Transactional

Analysis practitioner to do things to the client, nor does the client expect that the

practitioner will do everything for him or her. Both take part in the process of change, and

hence it is important that both are aware how the task will be shared. Therefore they enter

into a contract.

Open Communication: Eric Berne insisted that the client, as well as the practitioner,

should have full information about what was going on in their work together. This follows

from basic assumptions that people are OK and everyone can think. In transactional

Analysis practice, case notes are open to the client's inspection. The practitioner

encourages the client to learn the ideas of Transactional Analysis. Thus, the client can take

an equal role in the process of change. To help in communication, the ideas of

82


Transactional Analysis are expressed in simple language. It uses familiar words like

Parent, Child, Adult, game, script, stroke, etc.

4.3.2.1 Life positions

Another way of looking at relationships between people is through the concept of "life

position", sometimes referred to as the basic position or existential position. A person's life

position at any given time expresses in some way just how that individual is relating to

others in terms of thinking, feeling and behaving. There are four basic life positions as

shown in the OK corral,

I-.AJ:...iNOTOK-

WITH -ME

...

YOU-ARE-OK-WITH-ME

• Operation: Get-on-with Operation: Get- away-

from (GAF) (GOW)

Position resulting: 1- am- Position resulting: 1- am-

not- OK- with- me- and-OK- with- me- and- you-

you-are-OK-with-me. are-OK-with-me.

(Depressive Position) (Healthy Position)

Operation; Get- nowhere- Operation; Get- rid-off with (GNW) (GRO)

Position resulting: 1- am- Position resulting: 1- am-not- OK- with- me- and- OK- with- me- and- you-you-are-not-OK-with-me. are-not-OK-with-me.

(Futility Position) , (parano id Po sitio n)

YOU-ARE-NOT-OK-WITH-ME

.. I-.AJ:...i

OKWITH

-ME

Figure 4.1: Life Position Corral (adapted from Stewart and Joines, 1999)

There's some disagreement among Transactional Analysis authorities on how Life

positions originate and what age. According to Berne, the newborn baby is fundamentally

in an 'I'm OK, you're OK' position and only switches from this under pressure of early

experiences. He believed that' ... the position is taken in early childhood (third to seventh

year) in order to justify a decision based on early experience'. In other words, the early

decisions come first, and the life position is adopted later in childhood to make the world

appear to justify what has been decided. This view is based on trust being the starting

position of the infant, and that at birth 'all things are possible' until this trust is interfered

83

-----------


with. Hanis (1973) on the other hand views the birth position as 'I'm not OK, you're OK',

perhaps highlighted by the new baby's dependence on those around for food, warmth,

strokes etc.

In the view of Claude Steiner, life position is adopted much earlier. He suggests that all

children begin in the position 'I'm OK, you're OK'. The child shifts to another position

only if something interrupts the mutual dependence between child and mother. This

involves interference in the trust the baby has and could be triggered by anything from the

baby perceiving the Mother as withdrawing the protection and acceptance she had offered

in earlier days to even the process of birth itself. The baby may respond to these

discomforts by deciding that she is not-OK or that others are not-OK. The child then goes

on to build her script upon this fundamental view of self and others.

Even though there is disagreement on the age at which the life position is formed, but there

is agreement that life position justifies script decision. Life position can be defined as

"one's basic beliefs about self and others, which are used to justify decisions and

behaviour "(Stewart, and Joines, 1999).

Characteristics of the Life positions (Barker, 1984)

a) I'M OK, YOU'RE OK (1+ U+) : This is sometimes referred to as the "get on with"

position. People occupying this position are optimistic, confident and happy about

work and life. They exchange strokes freely with those they meet, accepting the

significance of other people, and decline to put themselves or others down. Their

dominant working style with others is collaboration and mutual respect, sharing

authority and responsibility and listening constructively, even if they disagree. The

problems faced are dealt with as constructively as possible.

b) I'M OK, YOU'RE NOT OK (1+ U-): This is sometimes referred to as the "get rid

"of position. It is characterised by feelings of anger, fury and hostility. Others are

seen as inferior, unworthy, incompetent, wrong and not to be trusted. Behaviour to

others is characterised by such things as spite, victimisation, trapping, disdain,

abuse and disregard. They may devote much time to the destruction of the sense of

self-worth of others. As well as putting others down, they over-inflate their own

self-worth and find it difficult to give positive strokes. They are highly competitive

84


and will try to achieve power and status and whatever cost, even if it means

exploiting fellow human beings.

c) I'M NOT OK, YOU'RE OK (1- U+): this is referred to as the "get away from"

position and is typified by feelings such as sadness, inadequacy, stupidity or sense

of being ugly. In this position, people experience themselves as inferior or

powerless in relation to others. They put themselves down and find it difficult to

accept positive strokes, even being suspicious of them. They undervalue their

potential and skills and avoid or withdraw from difficult situations and problems.

d) I'M NOT OK, YOU'RE NOT OK ( 1- U-): This is referred to as the "get nowhere

position" and is accompanied by feelings of confusion or aimlessness and

pointlessness. Their attitude is 'Why bother, what's the point?' and they frequently

waste time.

4.3.2.2 Script

The theory of script was first developed by Eric Berne and his co-workers, notably Claude

Steiner in the mid 1960's. Since then many other transactional Analysis researchers have

built on the original script idea. The concept of script now ranks with the ego-state model

as a central idea of Transactional analysis. A life script is a personal plan decided on at an

early age by each individual in response to external events. The most external factor for an

offspring is the behaviour, attitudes and influences of parents, or, in their absence, other

authority figures. On the basis of this influence, we make decisions about what kind of

person we are and what kind of life we are going to lead, these decisions being crucial to

our well-being and survival when we are young. These decisions or adaptations, which are

made in an early age may be dysfunctional in our relationships with others when we are

older.

The ways we give and get our strokes, structure our time, indulge in rackets, collect

stamps, and play games will depend upon our preferred life position and the script we

adopt. Our games, rackets and stamps, and time-structuring choices are all part of our

script reinforcing and motivating system. Our early experiences give rise to decisions

about ourselves, others and the world. This gives rise to the adoption of a preferred life

.position and a stroke balance, leading to the adoption of a script and script reinforcing

behaviour and followed by some kind of script "pay-off' in adulthood, which may be

dramatic or mundane, successful or disastrous. On the basis of the kinds of injunctions

85


given and the quality of the script outcomes involved, scripts are generally classified as:

winning scripts, non-winning scripts and losing scripts. This classification is only

approximate and is situational. What may count as a non-winning payoff for someone may

be a winning pay-off for somebody else. In fact, most of us decide on scripts which are a

mixture of winning, non-winning and losing in different areas of life (Stewart and Joines,

1999). But, the most important aspect is that any script can be changed. By becoming

aware of one's script, one can discover any areas in which losing decisions were made,

and change them to winning decisions. There is also a distinction to be made between the

message which is sent, the way it is received and the decisions or adaptation made. For

example: somebody can have a 'bad' upbringing and still turn out 'good', i.e. have a

winner script.

4.3.2.3 Ego- states

Transactional analysis IS a theory of personality and a systematic psychotherapy for

personal growth and personal change. As a theory of personality, TA gives a picture of

how people are structured psychologically. To do so it uses a three-part model known as

the ego-state model. The same model helps to understand how people function-how they

express their personality in terms of behaviour. TA also provides a theory of

communication, which can be extended to give a method of analysing systems and

organisations ( Blackeney, 1983).

Observation of spontaneous activity most productively carried out in certain kinds of

psychotherapy groups, reveals that from time to time people show noticeable changes in

posture, viewpoint, voice, vocabulary and other aspects of behaviour. These behavioural

changes are often accompanied by shifts in feeling. In a given individual, a certain set of

behaviour patterns corresponds to one state of mind, while another set is related to a

different psychic attitude, often inconsistent with the first. These changes and differences

give rise to the idea of ego-states. Eric Berne defined an ego-state as a consistent pattern of

feeling and experience directly related to a corresponding consistent pattern of behaviour.

An ego-state may be described in phenomenon as a coherent system of feelings and in

operation as a set of behaviour patterns. In more practical terms, it is a system of feelings

accompanied by a related set of behaviour patterns. These may be broken down into three

forms:

86


a) ego states which resemble those of parental figures- Parent ego state

b) ego states which are autonomously directed towards objective appraisal of reality

Adult ego state

c) those which represent archaic relics, still-active ego states fixated In early

childhood- Child ego state

Parent ego- state

behaviours, thoughts and feelings copied from parents or parent figures

Adult ego- state

behaviours, thoughts and feelings which are direct responses to the here-and-now.

Child ego- state

behaviours, thoughts and feelings replayed from childhood

Figure 4.2: The Ego state model (adapted from Stewart and Joines, 1999)

The unit of social intercourse is called a transaction. If two or more people encounter each

other in a social aggregation sooner or later one of them will speak or give some other

indication of acknowledging the presence of the others. This is known as transaction

stimulus. Another person will then say or do something, which is in a way related to the

stimulus, and is known as transactional response. Simple transactional analysis is

concerned with diagnosing which ego state implemented the transactional stimulus, and

which one executed the transactional response. The simplest responses are the ones in

which both stimulus and responses arise from the Adults of the parties concerned. Next in

simplicity are Child-Parent transactions. Both the types of transactions are. complementary,

i.e. the response is appropriate and expected and follows a natural order of healthy human

relationships. Transactions tend to proceed in chains so that each response is in turn a

stimulus. The rule of communication is that communication will proceed smoothly as long

87


as transactions are complementary and its corollary is that as long as transactions are

complementary, communication can in principle, proceed indefinitely.

The converse rule is that communication is broken off when a crossed transaction occurs.

The most common type of crossed transactions are: when the Adult of A communicates

with the Adult of B and instead of the Adult of B communicating with the Adult of A; the

Child of B communicates with the Parent of A or the Parent of B communicates with Child

of A. These types of transactions are the principal concern of psychotherapists.

Complementary transaction Crossed transaction

Figure 4.3: Complementary and Crossed transactions (adapted from Stewart and Joines,

1999)

4.3.2.4 Time structuring

Berne said that "the eternal problem of the human being is how to structure his waking

hours. In this existential sense, the function of all social living is to lend mutual assistance

for this project" (Harris, 1973). This problem troubles some people perpetually but others

may experience it relatively rare. When individuals fail to achieve a satisfactory structuring

or programming of their time they will look to others to do it for them. This is the

explanation of the occasions when for no apparent reason people ask' What shall we do

next?' or ' We need someone to organize us'. This need is called structure hunger. It is said

to be an outgrowth of recognition hunger, which stemmed from the need for stroking

(stroking hunger). The infant cannot programme his time but simply performs those

actions, which result in pleasure from moment to moment, (positive strokes). As the infant

88


grows he becomes increasingly capable of distinguishing between options for rewards or

pleasures and he also gains the ability to defer gratification between options for rewards or

pleasures and he also gains the ability to defer gratification as the number of these options

increase. However, the disposition of the Child may prevent the free exercise of choice

between options.

Whenever people get together in pairs or groups, there are six different ways in which they

can spend their time. Eric Berne listed these six modes of time structuring as: Withdrawal,

Rituals, Pastimes, Activities, Games and Intimacy

Withdrawal: This is the choice of having no contact with others. It may be purposeful and

deliberate, based on an Adult ego-state decision. Most people generally, need some time

for themselves, when they want to be alone. Though the extent and duration of the

withdrawal will tend to vary from person to person. In some situations, withdrawal may be

dysfunctional, for example: avoiding a difficult person, problem or situation that has to be

faced.

Rituals: a ritual is a 'socially programmed use of time where everybody agrees to do the

same thing' (Hams, 1973). Rituals are highly predictable and formalised exchanges

between people based on social customs and they are important in holding the fabric of

society together. They are as simple as a everyday greeting: hello, how are you? Very well

and you? Fine thanks' or may be complex, for example a coronation or election. The basis

of a ritual is that everyone is agreeing to do the same thing during that time. It is a

predetermined way of behaving towards others, a set of transactions, which is recognised

and accepted by all concerned. The purpose of rituals, according to transactional analysis is

to allow a group of people to structure the time, they spend together without becoming too

close.

Pastimes: Pastimes are a way of structuring time around topics of mutual interest. They

offer little threat and operate as a means to get to know people and decide whether or not to

form closer friendships and/ or to do business together. They are also important for self

confirmation, i.e. re-affirming who we are, what interest groups we belong to and our

status in society. They typically occur at parties and other social gatherings, and also at tea

breaks and mealtimes at work. Not having pastiming skills may be a serious disadvantage

89

------


in developing relationships with others. Because of their lack of pastiming skills, some

people are seen as being either withdrawn. On the other hand, some people never get

beyond pastiming with others and thus never form close relationships.

Activities: Activity is any behaviour directed towards external goals, such as hobbies and

sport, household activities, social activities and work. Activities can be very satisfYing in

themselves through creativity or productivity and very rewarding because of the strokes

gained from others.

Games: A psychological game is an on-gomg senes of complementary transactions

leading to a well- defined predictable outcome. Games are a way of maintaining the

person's view of the world. Games have the capacity for producing large quantities of

intense strokes that are mostly negative. Although games must, by definition, be structured

and predictable forms of transactions, they nonetheless have a higher information potential

than ritual, pastime, or activity. Games tell us about an individual's ego-state (internal

condition) as well as his pay-off values( Goldhaber,1976). Since, in this research buyer

supplier relationships are studied through the concept of Transactional analysis games, a

detailed explanation of Transactional Games and the processes used for analysing these

games is provided later in this chapter.

Intimacy: Intimacy is the most risky, and at the same time, the most rewarding way of

structuring time. It is that relationship between two people, which can exist independently

of all other means of structuring time. It feels genuine, true with no ulterior motives or

exploitation. Intimacy, which is based on the 'I'M OK-YOU'RE OK' basic position, is

game-free as goals never are ulterior. It is a relationship in which the Adult is in charge of

all those concerned and it allows the emergence of the natural Child, (that part of the child

which is creative, spontaneous, curious, aware, free of fear), as opposed to the adaptive

child (that part which has adapted to parental influences). It is unpredictable and un

programmed and can be risky and frightening, with the potential for personal rejection

(when we open ourselves up to someone else, we may not get an open response back).

This why so many people avoid it, particularly if they have any doubts about their sense of

OK-ness.

90

Ego states I Time structuring

I . allow us to descnbe and explain

Trans actions one way being

which result in

~ I

a rich negative source is

Games

I Practise our

~ I

support and

i Script


Life position

determines choice of

influences

I . Adopt our favourite

~ I

reinforce our own

.l. .l.

Figure 4.4: The main concepts of Transactional Analysis (adapted from Barker, 1980)

4.3.3 Transactional Analysis Games

Games are a form of time structuring, based on a particular kind of transaction involving

two or more people (Barker, 1980). In games people play, Berne has defined game as , " A

Game is an ongoing series of complementary ulterior transactions progressing to a well

defined predictable outcome." According to Stewart and Joines (I 999), there is

disagreement among Transactional Analysis writers about the proper definition of a game.

91


They say that Berne himself defined games differently at different stages of his thinking.

In earlier definitions of the game, Berne stressed the importance of Gimmick for the game,

but in the later definitions and after introducing the concept of Formula G, he referred to

the Switch and crossup as being the essential features ofthe game.

Stewart and Joines (1999) prefer to use Berne's later definition of games and define

games as "those sequences that follow all the stages of formula G, including the 'switch of

roles' and 'moment of confusion' represented by the switch and crossup." The reason for

not considering the earlier definition involving only the gimmick has been set out by

Stewart and Joines (1999), and Hewson and Turner (1992). According to them,

transactions without the Switch have been described in modern transactional Analysis by

another concept: racketeering. Fanita English, (1977) has made a clear distinction between

the process of racketeering and the process of game. Racketeers resemble game-players in

that they exchange ulterior messages, taking racket-feeling pay-offs at the same time. The

racket feeling pay-offs will enable the player to feel justified in feeling stupid, angry,

incompetent or whatever the racket pay-off is. In racketeering the transactions are at a

complementary level and there is no manipulation as found in a game. There is no switch

involved in racketeering. The parties may keep on racketeering as long as they both want

or have energy to, and then simply stop or do something different. When racketeering does

not work, one of the parties in the transaction pulls the switch and the exchange is

transformed into a game.

According to Stewart and Joines (1999):

, A game is the process of doing something with an ulterior motive that:

I. is outside of Adult awareness;

2. does not become explicit until the participants switch the way they are behaving;

and

3. results In everyone feeling confused, misunderstood, and wanting to blame the

other person.'

Some features that are typical of games are:

I. games are repetitive: every person plays hislher favourite game time and time

again. The other players and the circumstances may change, but the pattern of the

game remains the same.

92

Psychoiogicailmplications

2. Games are played without Adult awareness: even though the games are played

repetitively the players get aware that they are playing the game generally only

after the pay-off is received.

3. games are predictable: when the first move is made in the game, the outcome is

assured, unless the players are enlightened and aware and can spot what's

happening.

4. Games involve an exchange of ulterior transactions between the players: In any

game, there is an explicit social message, and also a covert psychological message,

which declares the players true intentions.

5. Games always include a moment of surprise or confusion: when the game ends the

players sense that something di fferent happened, and somehow the players have

changed roles. Since the players are unaware that they are playing the game, when

the switch occurs and the outcome comes to surface there is surprise and confusion

as the players get aware of the situation.

Different Degrees of games (Berne, 1964; Steiner, 1974; Stew art and Joines, 1999):

Games can be played at different degrees of intensity;

1. First- degree game: has an outcome, which the player is willing to share with

his/her social circle. It is mild and usually leads to mild discomfort. First degree

games make up a big proportion of the time- structuring at parties and social

gatherings.

2. Second- degree game: has an outcome, which the· player would rather conceal

from the public.

3. Third- degree game: is one which is played for keeps, and which ends in the

surgery, the courtroom, or the morgue.

4.3.3.1 Why people play games

People play games to further their life script (Stewart and Joines, 1999). Eric Berne

suggested the sequence by which we achieve this. At the pay-off of each game, the player

experiences a racket feeling. Each time hel she does this, the feeling is stored away as a

stamp. Thus each person chooses games to yield the kind of stamps that will advance the

person towards the script ending that hel she has decided upon. The script story may be

played through in miniature many times during the player's life. People choose the degree

93


of their games to suit the degree of their script pay-off. Each time the game is played, the

player uses the pay-off to reinforce that the script beliefs he/she has about self, others and

the world are true. Games are also used to confirm one's basic Life- Positions. Games are

a reliable way of getting a supply of intense strokes. The strokes exchanged in the opening

stages of the game may be positive or negative, depending on the game. At the switch,

each player gets or gives intense negative strokes. Whether positive or negative, every

stroke exchanged during a game entails a discount. Fanita English (1977) suggests that

people begin seeking game strokes when their strokes from racketeering are in danger of

running out.

Barker (1980) suggests the consequences and payoffs of games. According to him, by

playing games, people:

• avoid responsibility for the problem they have

• avoid the risks in being close to and open with others.

• Make people and situations more predictable

• Exchange negative strokes

• Structure time in a predictable way

• Keep re-experiencing a favourite bad feeling

• Confirm a life position

• Further their life plan.

Types of games:

Games have been identified and described in the Transactional Analysis literature (Berne,

1964; Steiner, 1974; Emst, 1971; Jongeward, 1976; Hewson and Tumer(1992), etc.). Most

games can be classified according to the strokes they tend to provide (Goldhaber, 1976).

Many games allow people to collect negative strokes by discounting themselves( e.g., Kick

Me, Harried, Stupid, Schlemiel, Poor me). Some games enable people to give negative

strokes by discounting others( e.g., NIGYSOB, If it weren't for you, Blemish, Yes-But,

I'm only trying to help you, Rapo)

94


4.3.4 Game Analysis

Game analysis involves identifying those elements of a person or group's communication

pattern when they interact simultaneously at two levels- social (overt), and psychological

(covert)- and when they are unaware of this doublespeak (Summerton, 1993).

Transactional analysis literature presents various procedures for game analysis. Although,

the most widely used processes have been the Con+Gimmick formula put forth by Berne,

and the Drama Triangle put forth by Karpman, there are a number of new procedures

researched and published for Game analysis. Summerton (1993) has presented a brief

synopsis of all the available processes of game analysis in his paper, which explains the

dynamics and limitations of each process. The researcher has focussed on using only the

processes introduced by Berne and Karpman, as the other new processes introduce many

more variables to the analysis and thus it is out of the scope of this research. Following is a

brief description of the two types of game analysis. Although there are many literature

sources for game analysis the following description is adapted from Stewart and Joines

(1999).

4.3.4.1 Game Formula

In 1972, Berne developed his final theory of game analysis, "Formuls G", or also known as

the game formula. The six elements of Formula G include the con, gimmick, response,

switch, crossup and payoff. The con and gimmick refer to the open and hidden messages

and the response to the series of duplex transactions. The switch is the ending of the

transactions and the move to the culmination of the game. The crossup is the moment of

recognition, and the payoff is the outcome. Barker (1980) has explained the same process

using ego-states.

C + G = R-' S-' X-' P Con+ gimmick-' = response-' switch-' crossup-' pay-off

'-___ ~ ...... ~--~J

may be simultaneous

Figure 4.5: The Con-Gimmick Formula

95


This fonnula illustrates a game between person A and person B as follows. The game is

initiated by A's discount (i.e. put down of self or other), referred to as con. A's little

professor has already spotted intuitively that B is a likely partner for the game about to

unfold. If B does respond accordingly to the secret message by also discounting, he/she

reveals the part ofhimlher that is interested in being 'hooked' by the con, and referred to as

the gimmick. A series of social transactions then follow, usually Adult to Adult, referred to

as the response. At some point, each player switches, i.e. they drop the facade of social

messages and demonstrate explicitly the previous hidden messages, together with the ego

states involved. At this point, a moment of confusion (the crossup), perhaps very brief,

maybe experienced by each person, followed by the pay-off, i.e. the 'bad feelings'.

4.3.4.2 Karpman Drama Triangle

In 1968, Stephen Karpman (as quoted In Summerton,1993), put forth the concept of

'switch'. He devised a simple yet powerful diagram for analysing games, the Drama

triangle. He suggests that whenever people play games, they are stepping into one of the

three scripty roles: Persecutor, Rescuer, or Victim. He summarized role changes in a

person's script with his drama Triangle. Berne used the 'switch' to describe the transition

from the familiar duplex transactions of the first part of a game to the less comforting

outcome of the game by linking the two elements he had identified: the series of

complementary ulterior transactions and the well- defined outcome. Usually, someone who

is playing a game will start at one of the positions and then will switch to another. This

switch in Drama triangle positions takes place at the moment of the switch in the game

fonnula (fonnula G).

( Persecutor)

P

(Rescuer)

R

(Victim) V

Figure 4.6: The Drama Triangle

96


As per the Drama triangle,

A persecutor is someone who puts other people down and belittles them. The persecutor

views others as being one-down and not-OK.

A rescuer , sees others as being not-OK and one down. But the rescuer responds by

offering help from a one-up position.

A Victim, sees himselfl herself as one down and not-OK. Sometimes the victim will seek a

persecutor to put him! her down and push him! her around. Alternatively, the Victim may

be in search ofa Rescuer, who will offer help and confirm the Victim's Belief I can't cope

on my own'.

Everyone of the drama Triangle roles entails a discount. Both the persecutor and Rescuer

discount others. The Persecutor discounts other's value and dignity. Extreme Persecutors

may discount other people's right to life and physical health. The rescuer discounts other's

abilities to think for themselves and act on their own initiative. A Victim discounts oneself.

A victim seeking a Persecutor will agree with the persecutor's discounts and views

himselfl herself as someone worthy to be rejected and belittled. The victim seeking a

Rescuer will believe that he/she needs the Rescuer's help in order to think straight, act or

make decisions.

When transactions start between two persons, each has decided upon the role he/she is

going to play. As the transactions progress, at some time, the roles are switched and this

causes the pay-off, but also leads to feeling bad for both the players. For e.g. when A&B

start to play, A is in the Rescuer position and B is the Victim. B expects to be rescued by A

and as the transaction progresses, the switch occurs and B takes the role of the Persecutor

and A takes the role of Victim. Both get their required psychological pay-off as both knew

the outcome when they started to play, but it also leads to both of them feeling bad about

the transaction, as both have to move into a different roles.

Another way to analyse games is to use a transactional diagram. This is specially useful in

bringing out the ulterior transactions between the players. The transaction diagram is a

depiction of the ego-states during the transactions and the flow of transactions between the

different ego-states.

97

Psyclzologicallmplications

4.4 Transactional Analysis in Organisational settings

Just as individuals have scripts, so do organisations (Jongeward, 1976). The lifeline of

many organisations resembles the lifeline of a person. According to Hewson and Turner

(1992), it is important to emphasise that the organisational script should be looked at as

more of a metaphor, rather than assuming the organisation is an actual sensing and

thinking body. An organisation is a social construct, and the actuality is that individual

people are operating in fairly predictable and patterned ways, to achieve some agreed

common purposes through some kind of contract. Using metaphors is a way of gaining

extra insights (Hewson and Turner, 1992). Jongeward (1976) reports that in her

observation, the most powerful force in forming the script of many organisations is the

personality, will and script of the founder. How that individual operated, how that person

related to others, what life goals he! she held, what parent tapes he ! she followed are all

likely to be eventually solidified into what is commonly known as company policy- both

written and unwritten .. Once these dramatic patterns are set, they often remain in spite of a

turnover in personnel. It is however not uncommon for a new charismatic leader to take

over the organisation and revitalise the place by influencing the organisation's script with

hislher own script. As per Barker (1980) authority and formality are two important

dimensions to consider when studying organisational scripts. As far as authority, the more

authoritarian an organisation is, the more Critical Parent it will be in its behaviour.

Conversely, the more participative and collaborative the organisation (less formality), the

greater the emphasis on Adult- adult and Free Child- free Child transactions, and the

greater the permission for staff to develop, learn, explore and innovate. He also mentions

that some organisations can find it very difficult to change to a participative style of

organisation, if adequate structures, help and time are not allowed for all concerned to

relearn and cope with the change. Organisational scripts tend to influence the type of Life

position the organisation holds and this also affects the way individuals working in the

organisation communicate with others internal and external to the organisation. The flow

of messages within and between organisations is affected directly by key variables inherent

to the organisation (e.g.: size, structure, purpose, history, environment and so on).

Communication between two people or within small groups can rely on nonverbal

variables such as facial expressions, tones of voice, or physical touch (Goldhaber, 1976).

Goldhaber, further adds, that while there are many interpersonal situations in

organisational communication, there are also times when hardware, large audiences and

98


written media are used. Hence, he reported three propositions inherent to organisational

communication:

I. Organisational communication occurs within a complex open system, which IS

influenced by and influences the environment.

2. Organisational communication involves messages, their flow, purpose, direction

and media.

3. Organisational Communication involves people, their attitudes, feelings,

relationships and skills.

Transactional analysis can be used in organisational settings if these propositions are

understood. This research focuses on buyer- supplier transactions and primarily on the

aspects of game-like behaviour and situational strength, hence if Transactional analysis is

to be used in this study organisational communication as described above needs to be

studied. Organisational communication as defined by Goldhaber (1976): " the flow oJ

messages within a network oJ interdependent relationships" can also be used for playing

games both on an individual level and organisational level. But game playing in

organisations is destructive and waste energy, time and money. The time spent on games

may be critical in terms of the reduced quality and effectiveness of relationships and work

(Unhelkar, 1999).

When it is said that games are being played in organisations or between organisations, it is

an explanation of the games played by individual human beings with each other and on an

inter-organisational level, by being representatives of the organisation. The description of

games that are played "by organisations" as entities with each other, has not been recorded.

The nearest explanation for these can be found in the concept of the "Law and order" game

put forth by Shaffer (1970). The Law and Order game is a game societies play with each

other. Shaffer (1970) reports that using societies instead of people in games has an initial

difficulty in that societies do not communicate as equals. But they do engage in

complementary transactions, the difference being that one society has a monopoly on

force. The subordinate society'S advantage is a sort of natural cohesion; it functions well

and that, rather than the management of force is usually its playing strength. Each of the

players inhabits roles, which correspond to Berne's Parent- Adult- Child roles. The

difference is that the roles are not equal- the subordinate society'S Parent role is not equal

99


to the dominant society's Parent role, it is merely complementary. If this reasoning is

transferred to the scenario of Buyer - supplier transactions, it is logical to say that the

attributes of the players, described in the Law and Order game match the attributes of the

transacting entities in buyer- supplier transactions (game-like behaviour).

1. societies do not communicate as equals ........ one society has a monopoly on force:

This is true in the case of supply chain relationships. Either the buyer or supplier in

most oJ the cases, has a monopoly on power and controls the relationship.

2. The subordinate society's advantage is a sort of natural cohesion; it functions well

and that, rather than the management of force is usually its playing strength- This

again explains the clubbing together oJ suppliers in order to get into a powerJul

position with the buyer.

3. The difference is that the roles are not equal- the subordinate society's Parent role

is not equal to the dominant society's Parent role; it is merely complementary- This

is also true oJ the buyer- supplier relationship, the dominant entities Parent in the

buyer- supplier relationship will always wield more power than the Parent oJ the

other transacting supply chain entity.

Although, logically it looks as if it appropriate to study buyer- supplier transactions using

the framework of the "Law and Order Game", it is not in the scope of this research to study

the aspect of organisations as entities and hence, the games that they play with each other.

The focus of the research is on the experience ofthe individual human beings in the supply

chain transaction. At a later date, it would be a worthwhile exercise to study "Games that

Organisations Play" using the frameworks set out by the "Law and Order Game".

4.5 Transactional analysis of Buyer-Supplier Games

Power difference between collaborators is one main stimulus to ulterior transactions, and

possibly also games. The collaborator with less power may often comply with the wishes

of its more powerful supplier or customer but it may also try to exert its own power in what

it considers to be a safe way and in an indirect manner typical of ulterior transactions.

Games are more likely when there is a clear dominance imbalance. To study the

Psychological aspects of the supply chain relationship , it IS necessary to vIew the

100


organisation in a different way

What happens in the communication transaction between interacting companies in the

network is not clearly known? Here, it seems that the Transactional Analysis technique

may be used although not in quite the manner conceived by Eric Berne (1964). In TA, a

game is an ulterior set of transactions usually with a negative pay-off which reinforces

script messages of at least one of the participants. Certainly, the assumption is that games

in the Berne sense may occur between individuals inside the company and between the

buyer and supplier, particularly, for the weak situation. However, the patterns of ulterior

transactions in the supply chains are not quite the same as the Berne games because they

are carried out as strategic moves by both companies and have an effect upon their long

term survival.

For transactions between compames, the mm IS to WIn - or perhaps to reaffirm -

dominance and gain advantage or counteract some others' dominance. So what the outsider

may perceive as being a negative transaction, which produces a negative payback is

actually essential for many businesses, and enables them to maintain their power base and

their dominance.

The researcher believes that the techniques of Transactional Analysis can be used to model

these interactions. Transactional Analysis applied in the weak situation involves script

messages coming from the parent adult or child states of the individual. These correspond

to the parental injunctions, the "should" and judgments, whilst the adult is factual and not

loaded with feeling and the child is emotional and feeling. According to Transactional

analysis people can speak from a number of script positions namely I'm OK You're OK

etc. In the weak situation it is individual pathologies that has the most significant

importance and determine the response patterns. In the strong situation, in its purest state,

the organisation pathology will be dominant. Berne extended his work to the organisation

defining the etiquette, the character and the technical culture. In the strong situation the

organization procedures and rules defines the stages and verbal patterns of the transaction.

Using Transactional Analysis the transactions can be depicted using the Parent-Adult

Child Model. From the research by Fox (1975), every firm or group has three aspects; the

technical culture, etiquette and character. The technical culture is the Adult or rational

aspect and consists of whatever scientific or technical knowledge and skill is required to

carry out the group activity. The etiquette is the Parent or traditional aspects of group

101

P~ychologicallmplications

culture; it enforces the social contract and provides form to the group process. Character,

(Child) the emotional part of the culture, consists of those behaviours permitted by the

etiquette. Fischer (1993) describes the job of the organisational Parent to set policies and

behavioural rules. It takes information from its external environment and internal systems

and transforms it into policies and behavioural rules for the adult and Child. This theory is

also put forth by Blakeney (1983), wherein he says that organisations are open and social

systems. They interact with the external environment. They take in energy inputs (stimuli,

in TA terms) and use internal processes and structures (ego states) to transform them and

make energy outputs (responses). He also proposes that every system is comprised of sub

systems each having ego-states. This means that when two firms in the supply chain

transact, the P AC of the Purchasing of one organisation will transact with the P AC of the

Marketing of the other transacting organisation. In reality most industrial situations will

involve some directive from the company intermingled with response patterns from the

individual. The organisational script and the individual script will interact depending upon

respective powers and dispositions. No individual is going to completely accept the

company injunction about behaviour, and in most cases the company would not want this,

however in some situations ambiguity in behaviour and decision-making must be removed.

In many cases the individual interacts with a strong situation attempting to make it weak

and give themselves more latitude of decision-making.

In many respects in the working environment the individual interacts with his own

organisation and both attempt to manipulate each other to get what each desires. The main

interest in this research has been some verification of the existence of games. Early

industrial examination of the relationships has tentatively confirmed that sometimes

opportunistic behaviour does take place and also often particularly in problem situations

where one party needs to win then some form of game does take place. Rather looking at

these games from a mathematical sense as in game theory the major interest is with the

psychological transactions and whether the technique of TA can be used as a reasonable

modelling tool to represent the pattern of transactions. In TA terms a games has a definite

sequence of activity typically involving a pattern of transactions, a switch, for example,

where victim becomes persecutor and a negative pay-off for one of the parties. In our

sense a game may not involve all these stages but may involve a regular patterns of

interaction some corresponding to the Berne games, some being collusive in nature and

some simply being a regular repeating patterns of transactions that this person or

102


organisation frequently exhibits under the same stimulus. The assumptions are that for the

weak situation the game set is largely specified and controlled by individual personality

whilst for the strong situation the interaction between the person and the organisation is

more complex and the organisation controls to a greater extent the transaction patterns

between collaborators. These games in the strong situation can be called organisation

games. The organisation game set is likely to be still part of the repertoire of games

defined by Berne but they form a unique set that is strongly influenced by the organisation

rules and procedures about behaviour preferences.

4.6 Individual or Organisational games

In examining inter-organisational games the researcher is concerned with interpersonal and

professional transactions in supply chains, transactions which are motivated by good

intentions for the organisation and maintained by the honest endeavours of people but may

in the longer term result in lowered trust between participating organisations and damage

future transactions. There could be a debate as to whether the games being played are

individual or organizational. Berne, wrote that the individual is willing to resign his own

games in favour of playing it the group's way. In Transactional Analysis Berne defined

many games that occur in various situations. These games depend upon life-scripts and

learnt patterns of behaviour and have pay-offs that confirm life positions.

Whenever compames or individuals interact, there is bound to be some relationship

pattern. Sometimes, this may be dysfunctional and need some action to improve it. At

other times, it may lead to highly productive relationships. The extent to which the

relationships can be planned and controlled is difficult to define. A highly-regulated

company will probably have set procedures for handling negotiation, and this will result in

a strong situation. Some companies may have relatively low levels of trust within their

respective organisations and, as a consequence, higher levels of regulation, Ackroyd et. al.

(1998). Such firms are also likely to impose high levels of regulation upon their less

dominant partners.

The behaviour between individuals in the organisation or when they are acting as proxy for

the organisation involves transactions of primarily verbal communication. However,

behind this communication there is a significant element of psychological message. In

addition, the verbal communication can become abusive and loaded with feeling itself

103


(Krone, et aI., 1987). Language games are used by organisational actors to disguise their

political intentions to mobilize support and provide opposition (Pfeffer, 1981). Various

games have been raised for example "making out" games to compensate for loss of control

over the labour process (Burawoy, 1979). Such behaviour is not clear and predetermined

with fixed objectives but it is rational to opportunities and to the behaviour of other actors

with respect to the decisions they make. For example an individual may enter an

organisation with every intention to be productive but may be pressurised to behave in

certain ways and limit their work output. They have to choose the strategy to adopt to stay

productive or join in the group game and risk sanctions if they do not. These organisational

games exist within the company between individuals and groups. They also occur between

collaborating organisations. Inherently the complex issue of power is involved; power that

may shi ft and move as the game is played so that the one that started as the dominant

partner may not be the dominant partner at the end of the game.

In the organisation people exist in a complex network of games somewhere they are the

victim of the game and some they strategically manipulate to their own advantage. In

many respects how they progress within the organisation and gain power depends upon

their skill to strategically manipulate the games to their advantage. Games can exist as

surface phenomena which are political games that provide surface context defining the

frame of reference for the individual in the organisation (Culbert and McDonough, 1980)

such as networking and ingratiation to achieve empire building. The games can be intra

organisational between groups and between individuals and the dominant coalition. For

example, "them and us" games. Or the games can be deeply embedded inside the

organisation representing the social reality of the organisation and not always within the

conscious knowledge of the participants. They are designed to maintain power balances. A

further discussion of these levels of games is provided by Frost (1987).

4.7 Limitations and assumptions for using Transactional analysis

Earlier, in the chapter, a case was made for the application of transactional Analysis to

buyer- supplier game-like behaviour. It is not so easy as it sounds, as there are a number of

limitations and assumptions that the researcher has to rely on :

104


I. The games depicted in Transactional analysis are mainly repeating patterns of

ulterior mechanisms conducted by individual human beings to get the required

psychological pay-off. This theory is transcended to individual human beings, but

not so much in their personal private context, but more in the context of

organisational behaviour. Hence, the researcher has to assume that the patterns of

ulterior mechanisms if not repeating in exactly the same fashion, are committed for

a definite pay-off, which mayor may not be psychological.

2. In transactional analysis terms, games are played by individuals in an unconscious

frame of mind, i.e. the individuals are oblivious to the fact that they are playing the

game, but are more concerned with the psychological pay-off, and mayor may

never realise that the pay-off they received after a transaction was due to the game

play they were involved in. In this research, the game-playing is a very conscious

commitment and the players know what they are getting into. The behaviours are

planned and played. Hence, if argued this may not be an appropriate application of

Transactional Analysis. To support the assumption of using Transactional Analysis

for analysing game- like behaviour between supply chain entities, the researcher

refers to the description of Psychological games given by Scott, (1976). According

to Scott, psychological games always include (I) a hidden meaning, (2) a set of

repetitive moves, (3) a switch or unexpected turn of events, (4) a predictable

payoff. In terms of TA, this is valid for each entity involved in the game, whereas

in supply- chain game-like behaviour all the above mentioned attributes are present,

but are experienced in a different way. To explain, consider (I) hidden meaning

for the entity, which initiates the behaviour, there is no hidden meaning, but for the

entity on the receiving end, there is a hidden meaning to the transaction; (2) a set of

repetitive moves- this could be experienced by both entities depending on the

ability to react to a situation; (3) a switch or unexpected turn of events- for the

receiving entity, the switch or unexpected turn of events will be felt strongly,

whereas for the party initiating the behaviour will brace themselves for the event;

(4) a predictable payoff- for the entity initiating the behaviour the payoff will be

predictable.

3. The major assumption for using transactional analysis is that since humans are

involved in the transactions, it can be assumed that humans will show some

105

Psychologicall mplications

psychological behaviour even though they are playing a very structured and

planned game.

4. One of the most important assumptions is that the use of Transactional analysis for

this research will be restricted to using the modelling capabilities to represent

transactions and analysing game like behaviours as depicted by researchers (

Hewson and Turner,1992; Goldhaber, 1976; Summerton,1993; Barker,1980, etc.)

who have studied the application of Transactional Analysis in organisational

settings.

4.8 Research Questions

The discussion in this chapter raIses a few questions which need further study to

understand the original research focus of studying the supply chain transactions and

relationships from the human perspective. These research questions are shown below:

Are transactions between individuals strongly influenced by the situational context


This is an important aspect to study, as it provides insight into the reasons for individual

behaviour in intra- and inter- organisational communication. Whether individuals are

depicting a certain kind of behaviour because of the situational context ( strong or weak) is

important to know as it shows the influence organisational culture can have on the

individual. Also, another factor that may be affecting individual behaviour and how the

transactions are held could be the power relations in the organisations, translating to whom

and to what extent an individual has to report to.

Where the manipulation of power in the organization is realized as games, is TA a


This chapter presented a brief SynOpSIS of Transactional analysis and the different

components comprising this theory. For this research, the essential components are the

aspects of Transactional Analysis games, their analysis, and the representation of

transactions using transactional diagrams. Hence, one of the important questions arising

106


out of the study is whether these components can be applied to study and explain the

dynamics of the supply chain transactions. Where the power struggle between buyers and

suppliers gets manifested in game-like behaviour, can they be represented using the

transactional diagramming method used in transactional Analysis.

If the games arise from the individual or the organization, is this contingent upon the

strength ofthe situation?

This research question pertains to the aspect of situational strength and the effect it has

upon supply chain transactions. The aspect to study is that, if the transactions between

buyers and suppliers get manifested in to game-like behaviour, does the strength of the

situation decide whether this behaviour is on account of the representative individuals or

due to the organisation,

4.9 Summary

The discussion in this chapter has provided the reader some understanding about

Transactional Analysis, and the importance game- like behaviour has in terms of supply

chain relationships. Also, the importance of Human discretion in these relationships has

been discussed, followed by the presentation of three research questions for further study.

107

Research Direction

Chapter 5

Research Direction

Aim:The aim of this chapter is to set a direction for the topics studied in chapter four. The

chapter presents the evolution in thinking for using the tools and concepts studied in the

previous chapters, and also presents a concept map which tries to bring together the

different concepts cohesively.

5.1 Introduction

The previous chapter set the tone for the further study of the concept of transactional

Analysis in the field of buyer- supplier relationships. Even though the researcher has tried

to convey the various concepts in the realm of Transactional Analysis, it is still not clear to

the reader how these concepts will actually be used. The researcher thus sets out to depict

the use of the concepts in this and the next chapter using data derived from the previous

stages of interviews and literature cases.

This chapter presents a concept map for studying buyer- supplier relationships and

transactions. The concept map takes into consideration some of the concepts introduced in

this thesis in the earlier chapters. Transactional Analysis provides a valuable insight into

the process that underlines these transactions and relationships and has been included in

the analysis of buyer-supplier relationships. The reader should bear in mind, that as said

earlier, it is very difficult to validate the use of Transactional Analysis in buyer- supplier

settings, unless it is done hands-on and the researcher has been present to actually witness

the event, which has not been possible in the case of this research. Hence, the other method

was to understand the transaction as it happened and interrogate it from all possible angles

in order to get a rich picture. The use of transactional Analysis in this setting has been

taken at face-value accepting transactional Analysis to be a validated tool in itself and

hence accepting it's use in these settings. Also, it has been used by various researchers

Jongeward (1976); Goldhaber (1976); Hewson and Turner (1992); Barker (1980); etc. in

organisational settings, and this provides some basis for use of this valuable tool in buyer

supplier settings.

108

Research Direction

5.2 Development of the Concept map

As seen in Chapter 2; Supply chains are being researched through different angles.

Different researchers and companies are focussing on various aspects of the chain. A

considerable amount of study has been done regarding Buyer- supplier relationships.

Vendor-assessment programmes; Partnership theories; Buyer- supplier Co-operation; etc.

have given a fair representation about how the interactions occur between the two entities.

Most of these studies on buyer supplier relationships have focussed on studying either the

issues of logistics or finance or in present days, information sharing. The aspect of

studying the human elements in these relationships considering game-like behaviour and

discretion and the effect that has on Inter-organisational relationships is the novelty of this

research. To get a comprehensive understanding of the different concepts studied in

chapter two within the context of this research, the researcher has used the technique of

developing a "concept map" or "conceptual framework" as described by Miles and

Huberman (1994). According to them, a conceptual framework explains either graphically

or in narrative form, the main things to be studied- the key factors, constructs or variables

and the presumed relationships among them. Frameworks can be rudimentary or elaborate,

theory-driven or commonsensical, descriptive or causal.

An important element in the relationship process is communication. The researcher has

proposed that communication in the supply chain relations takes place in three different

scenarios: stress, negotiation, and day-to-day. A stress communication occurs when a

dispute or problem arises and there is a possibility of a win-lose situation. It is believed

that situations of stress or general business negotiation are likely to lead to the occurrence

of organisational games. In situations of stress, most companies will adopt a strategy to

win or at least minimise the damage to them, and the ability to wield some power,

combined with strong-situation, where the organisation dictates transaction policy, leads to

the potential for organisational games. A similar situation of winning and losing occurs in

negotiation and again, games are likely but the patterns of transaction will be different

from those occurring in stress situations.

The figure 5.1, below depicts the different stages of communication occurring between

supply chain partners and the different situations under which games may be played.

109

Research Direction

Situation Day-to-day Negotiation Problem- Stress Strength Strong Mainly it will be adult to There IS potential for Here there is potential

adult transactions here. group games. Probably for Group based games. Unlikely to be much more likely with voice This is particularly true difference between voice strategy. Exit strategies for voice strategies. Exit and exit strategies. are probably still adult to strategies are more

adult. likely to result in crossed transactions.

Wcak This is unlikely 10 be There is potential for Projection of blame much different to the individual games - may result using Strong situation. particularly m VOIce standard TA games.

situations.

Figure 5.1 : Patterns of communication

The concepts studied in chapter two were structured using the concept map approach. The

concept map is shown in Figure 5.2 and as depicted in the figure, the concept map is a

compilation of the thinking and research by Cox et. al. (1999, 2000, 2001), Hirschman

(1970), Helper (1995), Mischel (1977) and Mullins et. al.(l999) and aims to determine

whether regular patterns of communication take place between collaborating and

transacting companies. The concept map is very important in terms of this research as it

brings together different concepts into a structure that provides an important insight into

the processes occurring in the relationship. The transactions or game-like behaviour

depicted is the culmination of the relationship process, which further affects how the

relationship will be conducted in the future.

The thinking behind developing the concept map is as follows. When conducting the

EPSRC project jointly with Liverpool University (discussed previously in the thesis), the

aspects of market and demand pressures on Supply chain management were studied in

depth and this lead to the researcher focussing on the aspects of the pressures on the

transacting entities to confirm to perceptions of performance (Harland, 1996) and level of

interest each entity have in the other. These factors play an important role in deciding who

has power in the relationship and this is supported in the literature by Cox, et. a!. (2000,

2001, 2002) when discussing power structures in supply chains and the four different

power regimes, viz. Buyer Dominance, Supplier dominance, Independence and

110

Research Direction

Interdependence. The analytical framework developed by Cox recogmses that although

power advantages might often not be explicitly exploited in buyer-supplier interactions, the

ReI Collaborarh'e ..... ~,-··~·-·-L-~~,-; ... ·()"f i~~e;;st~ ~r-- .----- --- -~- .. --. Marke.! work done wiIh -. ., Liverpool University \ both Entities ---...... Perception of "\,. Demand on the DNA project. \\_-_ __ ...... Performance 'i--- pressures

":::,::,::,~::: '''' · ;"'.~" ~ ,.", .. ~,~;" t) ~:,;' g:=,'~:;; Implications Independence

\ Inter-dependence

Strategy to Pla Y

j

... Power ./ --1''----... S tru ctu re '-----.,.., ----'

Payoff ReJ-Cox. 'et, al. (20()O. 200!. 200}) I I Games 1 Exit

Need to Play dentified RelationshiR ___ • Voice

Strategy -·'L __ ---..-'

! p.

Ref:flirschman (J970), He/per (/995)

Regular Transaction; probably more dependant on the individual

Communication

Requirement of Payoff identified

If, Strong

,

If, Weak

--Pattern --. ,-----------,

/ • Day-ta-Day • Negotiation • Problem-Stress

Transaction .... _.... Ref'Mischel(l977)

L---------------------~====~S~i~t~u~a~t~io~n~~-~-.. ~----~

Cause for Occurrence of Games :

1. Script! Culture of the entity 2. Organisational Life position of

the entity 3. Communication between ego

states of the entity 4. Role play as specified by the

Drama Triangle

Strong"" When the organisational culture, Script, play a dominant role in the transaction process. There is no ambiguity in communication and everybody follows the same rules and policies for communication Weak"" When the individual involved in the transaction plays a more dominant part, and the organisational culture does not affect the process. There is ambiguity in communication and no sel rules or policies for transacting

Interactional Psychology

Figure 5.2: Concept map for depicting psychological behaviour between supply chain

entities

very existence of a power imbalance conditions buyer and supplier behaviour. They

contend that power does not become any less important to an understanding of buyer

supplier relationships simply because it is not exercised. Whenever companies or

11 I

Research Direction

individuals interact, there is bound to be some relationship pattern. Sometimes, this may be

dysfunctional and need some action to improve it. At other times, it may lead to highly

productive relationships. The extent to which the relationships can be planned and

controlled is difficult to define.

The power structures seems to suggest that in terms of dominance and independence the

dominant entity mayor may not amicably find solutions when issues crop up in the

relationship, but in situations of interdependence the entities in the relationship always

strive to find solutions to any issues in order to keep the relationship working. The aspect

of entities trying to make or break the relationship has support from the research conducted

by Helper (I 995} using the concepts of exit and voice proposed by Hirschmann (1970).

The researcher has previously proposed in this section that the communication patterns for

conducting the relationship will vary as per three situations: day-to-day, stress or

negotiation. Hence the power structures and the use of exit or voice will have a profound

effect on how communication is conducted during any of three situations.

Once the communication pattern is known it is also important to know who will be

conducting the transaction and at what level. The concept of situational strength (Mischel,

1977) gives further insight to this issue of whether the individual conducts the transaction

on his own or conducts it as per the guidelines set out by the organisation he/she is

representing. In this case, if the situation is strong then the individual conducts the

transaction as the organisation wants it to be done, whereas if the situation is weak then the

individual is free to conduct the transaction as per his own personality. The exact form of

the transactions depends upon the strength of the situation and the learnt patterns of

behaviour, which have been developed either within the organisation (strong situation) or

by an individual who has autonomy to decide on interaction communication (weak

situation). In addition to the comparative power between collaborators the commitment to

resolving any problems is also important. In this research the concept of the voice and exit

strategies is used. Voice participants are generally members of an inner-group that argue

out and negotiate problem situations whilst exit strategy participants generally exit the

relationship when serious problems emerge. An exit strategy is often used by a buyer when

it has a wide range of supply alternatives and it is not committed to purchasing from a

particular supplier. The derived concept map incorporates power difference, voice and exit

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Research Direction

strategy in addition to the concept of situation strength. A weak situation is one where

there is some ambiguity and latitude in defining the rules of the relationship and

consequently interacting people have significant discretion in deciding the transaction

patterns. This is in contrast to a strong situation where the discretion for the individual in

decision making is less and the transaction pattern is strongly influenced by the rules of the

group or organization. The transactions may vary across each value stream inside a

company or there may be a consistent policy for all the value streams. A pervasive power

culture, a large defensive company, a highly-regulated company will probably have set

procedures for handling negotiation, and this will result in a strong situation as defined by

Mischel (1977) where company policy dictates the transaction process. Some companies

may maintain relatively low levels of trust within their respective organisations and, as a

consequence, higher levels of regulation, Ackroyd et. al. (1998). Such firms are also likely

to impose high levels of regulation upon their less dominant partners.

Companies try to utilise as much power as they can in situations and change dependency

relationships in ways to maximise their advantage. For example:

I. A relatively small supplier has a large part of its business dependent upon one customer

who, by virtue of its power, is able to define the rules of the interaction partnership to

its own benefit as well as defining the supplier's benefit. However, a supplier will

probably try to reduce its dependence upon a particular customer by diversification,

and then it may be able to acquire leverage with its customer to achieve better benefits.

In this case, the less powerful has attempted to increase power to achieve greater

benefit and less risk from the dominant partner.

2. A supplier exploits a negotiation situation by first accepting the price targets set by a

more powerful buyer, and then attempting to exert its own power by technically

locking-in the buyer with, for example, significant investment in the supplier's tooling

and methods, so that switching costs would be prohibitive for the buyer. Then the

supplier may be able to reverse the power balance to some extent to adjust the pricing

situation to its own advantage.

The final aspect of the concept map stresses the use of Transactional Analysis and the

concept of games as set out in Transactional Analysis (Berne, 1964). The concept map

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Research Direction

suggests that the transaction may be conducted as a game by the entities in order to get the

required pay-off. If the situation is strong then the pay-off is decided by the organisation

and the game-like behaviour to be shown is also decided by the organisation. If the

situation is weak, then the individual decides his individual pay-off along with the required

organisational pay-off and depicts game-like behaviour as reported in the literature on

Transactional analysis games. Using the terminology of Transactional Analysis

(Berne,1964; Stewart and Joines, 1999), the concept map identifies the situations, which

can produce such patterns. The patterns form the basis of what are called organisational

games, drawing parallels with the individual games described by Berne(1964). An

organisational game is a regular pattern of ulterior transactions between organisations,

generally resulting in a negative pay-off for one of the partners. An ulterior transaction is a

communication pattern containing psychological messages, which may not be consistent

with the spoken communication. It is the assumption that the actual variety of these

complex repeating patterns of games can been modelled using Transactional Analysis (TA)

game theory. One of the beliefs arising from the concept map is that for the weak situation

the game set is largely specified and controlled by individual personality whilst for the

strong situation the interaction between the person and the organisation is more complex

and the organization controls to a greater extent the transaction patterns between

collaborators. These game like behaviours in the strong situation can be called organisation

games. The organisation game set is likely to be still part of the repertoire of games

defined by Berne (1964) but they form a unique set that is strongly influenced by the

organisation rules and procedures about behaviour preferences.

Although the concept map depicts that the concepts have a direct relation between them in

the transaction process, this has not been proved and is shown through intuitive reasoning

based on the literature review of the concepts studied. It is not in the scope of this research

to prove the effect of each concept on the other, but more to study the etfect of power, exit

- voice and situational strength on the game-like behaviour shown during transactions.

5.3 Where does this research fit in?

The aim of the research project described In this thesis was to investigate the inter

relationship and alignment of supply and demand networks from three perspectives namely

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Research Direction

the physicalloperational, the informationlknowledge systems and the relationships

!behaviour that take place between collaborating partners. The research was carried out

over an eighteen-month period and was supported by the UK's Engineering and Physical

Research Council (EPSRC) as a collaborative project between the Universities of

Liverpool and Loughborough. Through case studies carried out in the automotive, machine

tool and food manufacturing sectors, models of the interactions of the demand networks

operations' variables and their alignment issues have been proposed and tested. These

models have been combined into a DNA like representation of an intermeshing network of

two strands each contributing to the quality of the supply and demand network system

(Sharifi, Kehoe, Burns, et. al. ,2002)

The alignment of the physicallinformation system is modelled as a continuously evolving

DNA strand. Similarly another equally important strand is suggested in the proposal which

represents how interpersonal and inter-organisational relationships interact with the

physical structure of the supply chain. With the combination of these two interconnected

and intermeshing strands, a new presentation of the DNA structure of demand networks

which in this case stands for Demand Networks Alignment has been depicted.

The physical/information strand schematically illustrates the causality between the various

elements of the system - market demand, product characteristics and business goals -

aligned to the strategic and operational characteristics of the demand network - the

information, , and logistical systems including transportation and storage systems and their

locations. The causality in the relationship strand defines how the transacting companies in

the demand network communicate with each other. The patterns of communication

proposed between collaborating partners form the basis of what are called organisational

games.

115

Phy.;icall operational sy.;tern strand

Markets, competition and ~ product characteristics.

Rules of partnership, situation strength

Nel\\Qrk strategy and configuration

Comnnmication twe and pattern

Information system operations

Relationship I Behaviour Strand

Market I Product strategy

Relationship !)pe

strategy

Research Direction

Network operations and connrnmication ( infonnation sy.;tem;) planning

Grures that take place

Figure 5.3: Demand network Alignment (adapted from Sharifi, Kehoe, Bums, et. al. ,2002)

The two strands were developed simultaneously by the Universities of Liverpool and

Loughborough and validated through a number of case studies. The suggestion of a double

helix effect within which the two main systems of a supply chain work interactively to

create, develop and manage the demand network was basically generated from

observations from the case studies. The case studies in particular provided convincing

evidence of the effects on the structure and operations of a supply chain of the power

distribution and relationships within the supply chain. The ownership of the supply chain

in terms of knowledge, technology, finance and market, and the power these advantages

confer could, and evidently have, affected the structure of the supply chain. However,

ownership and power have not necessarily been beneficial either to the whole supply chain

or to the owner. The onset of game playing can result from the misalignment of the supply

chain from this point of view .. Furthermore, these behavioural aspects have been found to

have a severe effect on the structure, performance and hence success of the supply chain.

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Research Direction

5.4 The Research Fit

The researcher has tried to familiarise the readers with the basic concepts studied in this

research and how the thinking has evolved around the research domain. The research aim

has been mainly exploratory, to explore whether there are other dimensions to buyer

supplier relationships other than the ones already studied by various researchers around the

globe. Hence, the discussion in this thesis has been revolving around a few sets of data

depicted in chapter 3, as the researcher feels that the amount of data is not so important in

this context as much as the information coming out of it. The concepts studied have been

brought together in the concept map earlier in this chapter, but something more is needed

to use the concepts in a defined manner. The researcher now will present his perspective on

the relationships and provide a framework which he feels describes the psychological

process that underlines these buyer-supplier relationships.

The concept map, as described earlier in the chapter has been a very important milestone in

this research as it brings together various concepts in one logical flow. It has also been

remarked earlier that proving the exact relationships between the concepts is not in the

scope of this research. However the concept map has proven useful in developing the DNA

structure for supply chain alignment. The concept map was a representation of the

relationship approach to alignment, which was incorporated into the DNA structure by

combining it with the research done at Liverpool University. The most interesting part of

the concept map is the depiction that there are many factors affecting the relationship, and

also that all these factors interplay to affect the individual human beings in the relationship.

The concept map provides a linear flow between the concepts, whereas the DNA structure

links up the various stages in the concept map to the issues of physical alignment as put

forth by researchers at Liverpool university. The concept map and the DNA structure

provide evolutionary processes to study supply chain alignment. The focus of this research

has been identified as studying the effect of these concepts on individual and

organisational behaviour, hence there is a need to focus more on the processes that occur

after the concepts have played their part. Hence, if the concept map (fig. 5.2) is referred to

again, the study needs to focus on the part of the concept map, which highlights the

behavioural aspects of the relationship. This is primarily the aspects of game-like

behaviour and whether the behaviour is conducted by the organisation or individual. This

has been transferred to some extent in the DNA structure wherein if the reader follows

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Research Direction

figure 5.3, it will be clear that in the relationship strand of the DNA structure the process

starts at the power and trust level following through to game-like behaviour and in turn

aligning with the various stages in the physical strand. The game-like behaviour culminates

the relationship process and then the next set of processes start again with the power and

trust level. The DNA structure thus depicts the alignment between the physical and

relationship strands and that the game-like behaviour is the just the start for another

relationship scenario.

Neither figure spells out what exactly happens when the behaviour has been conducted.

There is therefore further need to study the after effects of the behaviour on the

relationship. This does not undermine the importance of the concept map and the DNA

structure but adds to that knowledge by going one layer deeper into the procceses to figure

out the underlying processes occurring between the need for game-like behaviour and the

next stage of power play. This has been proposed in figure 5.4, The figure uses the same

concepts as depicted in the concept map, but where the concept map depicted the processes

occurring for one organisation, figure 5.4 depicts two organisations and the interactions

occurring between them. It focuses on the game-like behaviour and the result of the

behaviour, when depicting that power, situational strength and exit- voice strategies play

important roles in achieving the desired result of the behaviour.

The philosophy behind studying transactions and the relationship behaviour stems out

from the following figure 5.4. As seen in the figure, the outcome of the game-like

behaviour brings out a change in the power structure of the relationship. It is not always

that there will be a change of power, but sometimes the status-quo in the relationship

remains and the relationship just progresses as it is, until a change is sought by the other

party. In terms of the buyer-supplier relationships, the entity, which does not get the

required outcome, stays dissatisfied and tries to get the change done. The duration of time

in between the two events is mainly filled with distrust, bad feeling and on a personal

level- resentment. As seen earlier in the thesis, one of the requirements for studying these

game-like behaviours is that these behaviours will lead to a spiral of distrust, which will

further lead to a disintegration of the relationship. It is not always that each entity in the

relationship will strive for partnership or collaboration. The reason for being in the

relationship for some entities would be to get as much as possible out of the relationship

without considering the interests of the other entity.

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Research Direction

Organisation A Organisation B

r--"-- "j , Strategic

i Situation strength i Strategic

Application , / Exit-Voice Application of Power ~ of Power .. i

N influences

Power used Power used to gain f to gain advantage .. H advantage

Game- like

Opportunistic .... Behaviour ~ -i Opportunistic -+-behaviour ! Behaviour

,

Defensive tting rules for Game result strategies Se

ot hers .. - ...... -i ,

..... ................... -.. -......... ~

I / ~ ..... ............ _._--_ .... . ....... _ ......

~ No change Suspicion of new of Power power balance

+ Alteration of Power

Power regime I

Figure 5.4: Dynamics of the transactions and relationship between supply chain entities.

(Organisation A or B could be either the buyer or supplier in different situations)

This is particularly alright if that is what the entity stands for or in other words that's what

its strong situation strength suggests. This research does not discuss or suggest whether it

is beneficial for buyers or suppliers to have collaborative relationships or strive towards

transparency or partnership, nor does it say that it is good to exert power in the

relationship. This research does the task of presenting the various scenarios that occur

between buyers and suppliers and the underlying processes governing these scenarios.

Also, suggested are some pointers for buyers and suppliers to move towards partnerships.

These pointers are not suggested as the only solutions for achieving partnerships or

collaborations, nor are these in anyway presented to undermine the already published and

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Research Direction

future work that so many esteemed researchers are already conducting in this field. The

suggestion merely tries to use the vast literature available and present some additional

pointers from the perspective of this research.

In this research it is assumed that in a weak situation individuals involved in transactions

adopt patterns based upon their own predispositions, maximising their own power, access

to information, or political influence. In contrast in a strong situation the organisation or

group provide strong guidelines and sanction people if they depart from the guidelines. In

the strong situation the organisation ensures that a certain behaviour results when a

stimulus occurs. The organisation may do this because it needs controlled and predictable

responses for safety reasons or to minimize damage resulting from a problem, or to

guarantee particular performance levels. However, in both strong and weak situations the

relationship between the individual predisposition for behaviour and the prescribed

behaviours preferred by the organisation is complex. People with certain trait patterns will

seek to maximise their own situation regardless of the strength of the situation others will

prefer to work in environments having particular situation strengths and they will seek

employment in companies offering these conditions. A framework for these interactions

between individuals in collaborating organisations is shown in Figure 5.4. The figure

depicts the process of two organisations transacting in a supply network relationship. The

power regime (Cox, et aI., 1999) network entities will decide how the game is played and

the aspects of power coming into play. The effect of situation strength will decide whether

the persons representing the organisations play their own game or play the organisation's

game.

Looking back at the figure, after the game-like behaviour or transaction occurs, the entities

view the event from their own perspective, particularly interesting is the research done by

Harland (1995,1996), on customer dissatisfaction. The underlying processes that provide

some reasoning to the behaviour can be explained with recourse to the Klein's goal

orientation motivation model (Arnold et aI., 1998). The researcher speculates that this

depiction of the process represents particularly the way people interact across a network of

organisations in a distribution or supply chain. When the Klein's goal orientation model is

modified it depicts the internal processes as they occur within the organisation as the

organisation plays the game with the transacting organisation in the supply network. The

reasoning as said above uses the Klein' s Goal orientation motivation model where the goal

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Research Direction

of the organisation is to gain the competitive advantage or the critical resource or profit or

simply justify its evolutionary script. The goal leads to behaviour which is the· game

playing, the result of the game is then compared with the set goal and if there is no error

then the organisation knows the best strategy to fulfill its goal and continues the same

behaviour. But ifthere is an error, then two steps are possible:

I) if the situation is familiar to the organisation the organisation knows the right

processes from its previous experiences, and so unconsciously it responds in that

script and tries to fine tune the process until it can achieve the goal.

2) if the situation is not very familiar, then the organisation based upon effect of

variables such as power regimes, situational strength etc. will try to either change

the goal or if that is not possible will try to change the behaviour in order to achieve

the set goal.

The effect of situation strength will decide whether the organisational dispositions effect

the persons in their behaviour or their personal dispositions. This has in no way been

validated as a separate model of buyer-supplier behaviour, but is merely a speculation,

which provides the reader some understanding at individual organisational level. This

process may be perfectly right or in fact may not be a valid representation for the

behaviour, but it provides a valuable perspective for the decisions taken by the

organisations after the transaction is complete. This research will not delve on this

reasoning in detail as the objective of this research is not the processes of achieving

decisions, but more of deciding what next to do once the decisions are taken.

Looking at the outcome of the event, it is thus assumed that each entity queries the event in

the following way; (this is an assumption and is not in any way proof of what entities

actually do, but it is logical to consider the following questions:

I. Did the transaction proceed as required?

2. Was the pay-off(outcome) received as required?

3. Do we want to change the pay-off or the way the transaction is conducted?

Considering how this research has developed and assuming that both buyers and suppliers

will have their respective perspectives on the transaction, the researcher hence forth

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Research Direction

presents the new perspective to these relationships. It IS suggested that In the buyer

supplier relationship four scenarios could exist:

I. The Buyer is satisfied, Supplier is dissatisfied.

2. The Supplier is satisfied, Buyer is dissatisfied.

3. The Buyer and Supplier, both are dissatisfied

4. The Buyer and Supplier, both are satisfied.

High

Buyer', leve I of satisfaction with rel.tionship

Low

Buyer Do minance

Exit I Buyer i, ,.tisfied, Supplier i, di" .ti,fie d

Buyer is dissatisfied, Supplier i, di,s.ti,fied

Exit II

Independence

Low

In rerdep endeJl£e

Voice N Buyer i, ,.ti,fie d, Supplier i, ,.ti,fie d

Buyer is dissatisfied, Supplier i, ,.ti,fie d

Exit ill Supplier Dominance

High

Supplier', level of satisf.ction with rel.tionship

Figure 5.5: The Relationship Matrix

The Relationship Matrix presents the relationship scenanos In four quadrants. Even

though the relationship scenarios look similar to the framework developed by Cox, et. al.

(2000) , it does not in any way undennine the importance of the original framework and

supports it by adding another dimension to the study of buyer-supplier relationships.

The four quadrants signity four different scenarios occurring at different times in the same

relationship. The matrix presented is also a tool to gauge the future of the relationship. At

face value, the framework looks to be very simplistic and may raise doubts in the minds of

the reader whether it has any real value. The researcher thinks that the tool is not meant to

be a clear-cut solution for a relationship problem, but more of a starting point for further

diagnosis of the relationship. It is suggested that the use of this matrix is done more for

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Research Direction

deciding the future of the buyer-supplier relationship which spells out some suggestions for

achieving it.

Some of the questions that may arise when a buyer or supplier organisation decides to use

the tool for gauging the future of the relationship are:

I. Is the Organisation willing to form partnerships?

2. Are the individuals willing to follow strict policies for dealing with the other

entity?

3. If the organisation is willing to go for Interdependence, are individuals in the

organisations playing their own games and acting as an hindrance to this activity?

4. If the organisation is not willing to go ahead with the partnership, what are the

consequences of the relationship?

These questions are important from the perspective of relationship strategy and

formulating the roadmap for achieving the strategy. The researcher thus suggests the

following use of the framework:

Every entity in the relationship is bound to have a perspective on how the transaction

occurred. This has been shown earlier in the chapter and the four scenarios have been

suggested. These four scenarios as modelled in the framework suggest that entities will

accommodate themselves on one of the quadrants of the framework. Once this initial

position is sought, then starts the strategy to move to the desired quadrant to get desired

pay-off. The complexity increases and the game-like behaviour increases when both

entities have a different agenda and each is trying to get the desired output according to

Porter's model (Porter, 1998 ), the buyers and suppliers will try to gain as much advantage

as they can from the relationship, hence the outcomes will differ and the strategies too. The

only consensus when the movement will lead to the same quadrant is for partnerships. This

can be represented by the fourth quadrant, where both parties are interdependent upon each

other and thus are in a state of partnerships. This may seem very simplistic in explanation

when compared to the different types of relationships set out by Cox, et. al. (2002), and

partnerships would be described in a different way, but the underlying logic of referring to

the fourth quadrant as a partnership quadrant due to the level of interdependence is

sufficient for this research. As the tool is used further and specific strategies are obtained,

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Research Direction

the reference to Cox's work would be an advantage. These strategy movements could be

depicted as below:

No movement the entities are satisfied with the outcomes and the quadrants

they are in, so they will not be any movement.

Quadrant I »» The buyer is satisfied , but the supplier is not, hence the

Quadrant III buyer tries to maintain status quo, but supplier tries to shift

the outcome to that of quadrant Ill, in order to get into a

more powerful position.

Quadrant I »» The buyer is satisfied and supplier is not, the buyer tries to

Quadrant 11 get rid of the supplier and hence has to move into quadrant

11, which spells out that buyer is not satisfied with the

relationship, the supplier maintains status quo.

Quadrant I »» The buyer and supplier both move towards the Fourth

Quadrant IV and quadrant, of interdependence. This has to be done by both

the entities and the result is a partnership. As the framework

Quadrant III »» suggests, the situation leads to a voice strategy, wherein both

Quadrant IV entities amicably sort out differences and try to maintain the

partnership.

Quadrant III »» The buyer is not satisfied , but the supplier is . Hence the

Quadrant I supplier tries to maintain status quo, but buyer tries to shift

the outcome to that of quadrant I, in order to get into a more

powerful position.

Quadrant III »» The Supplier is satisfied and buyer is not, the supplier tries

Quadrant 11 to get rid of the buyer and hence has to move into quadrant

11, which spells out that supplier is not satisfied with the

relationship, the buyer maintains status quo.

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Research Direction

Quadrant II »» This is a major task as both the entities are not satisfied in

Quadrant IV the relationship and they have to make an extra effort to

revive the relationship, and move from independence to

interdependence.

Quadrant IV »» This movement is also a major step as both the entities

Quadrant II decide to move out of the relationship. Voice strategy

changes to exit.

Quadrant II »» The buyer decides to move to Quadrant I and gets his

Quadrant I outcome and position of power, supplier stays in position of

dissatisfaction until the next move.

Quadrant II »» The supplier decides to move to Quadrant III and gets his

Quadrant III outcome and position of power, Buyer stays in position of

dissatisfaction until the next move.

Quadrant IV»» The buyer decided to move out of the partnership to a more

Quadrant I powerful position.

Quadrant IV»» The supplier decides to move out of the partnership to a

Quadrant III more powerful position.

Figure 5.6: The movements ( quadrant- hopping)

As seen above, the table sets out 12 movements, which will occur in these relationships.

The movements as suggested above are the individual decisions taken by the buyers and

suppliers probably in a proactive or reactive mode. Hence, it is difficult to comprehend

how the decisions are taken. If the decisions are taken in a proactive mode, then the buyer

and supplier will decide their strategy or movement without taking into account the

decisions taken by the other entity. Whereas, if the decision making process goes into a

reactive mode, then the situation would be like a game of chess, where each entity knows

its strategy map, but also plays only after the other entity has made its move. If the

decisions are taken in a reactive mode, it may be easier for the researcher to comment on

the scenarios, but ifthe decisions are taken in a proactive mode, the situation gets complex

and it is difficult to predict how the transaction will culminate. The relationship, if not

exited will progress through a series of different movements until both entities are satisfied

with the state of the relationship.

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Research Direction

The researcher will now explain each movement in more detail,

1. No movement: In this situation both entities are satisfied with the result and are

ready to continue in their present situations. For both entities to be satisfied with

the result, ( it could be any quadrant), the entities have analysed their environments

are aware of their strengths or weaknesses, their power positions and are willing to

maintain the status quo. If the situation is of quadrant IV, the situation of good

partnership, both entities are happy about the relationship, and using voice strategy

try to maintain the relationship. If the entities are in quadrant 11, the entities have

agreed to exit the relationship, and are not ready to reconcile or get back again in

the relationship. If the entities are in quadrant I and there is no strategic movement,

it suggests that the buyer is powerful, and the supplier knows it and agrees to that

relationship. The supplier knows that this is the only way it can survive and so

maintains status quo. Is the entities are in quadrant Ill, the supplier is powerful, and

the buyer knows the power position and is willing to maintain status quo to stay in

business.

2. Quadrant I »» Quadrant III : In this scenario, the supplier is not satisfied with

the outcome of the relationship or transaction. The supplier wants to get back into

his position of power or at least try to get as much advantage out of the

relationship. The movement will be conducted by using any of the strategies put

forth by various researchers for supplier power, striking is the work conducted by

Porter (1998). Also, looking at this movement from the perspective of this research,

the supplier may try to conduct game-like behaviours depicted in chapter 3 to gain

a powerful position or gain advantage in the relationship.

3. Quadrant I »» Quadrant 11 : In this scenario, the buyer wants to exit from the

relationship, hence will try to move to the quadrant, wherein the buyer shows

dissatisfaction with the supplier. The supplier is already in a dissatisfied state and

so it is easy for the relationship to end. The relationship will keep going only if any

one ofthe entity makes an effort to rejuvenate the relationship. Also, looking at this

movement from the perspective of this research, the buyer may try to conduct

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Research Direction

game-like behaviours depicted in chapter 3 to exit the relationship and move into

quadrant II .

4. Quadrant I »» Quadrant IV and Quadrant III »» Quadrant IV: This

scenario is of working towards a common goal, and having a complete voice

relationship. It is of creating a situation of interdependence wherein, it is in the

interests of each entity to stay in the relationship and make an effort to keep it that

way. The movements have to be done on the part of both entities. It is a major step,

wherein both entities without paying attention to their power positions, ( the power

positions may still be prevalent based on other factors viz. size of the company,

profitability, technology, etc.) try to instil governance mechanisms as reported by

Jap (2001) and other researchers (Powell, 1990; Heidi, 1994 ), in order to achieve

the stage of interdependence. It is a major task, as each company has to move from

its level of satisfaction and think about the satisfaction of the other entity in the

relationship. This movement calls for the elimination of game-like behaviour. If the

buyers and suppliers have to achieve this, they have to get into a strong situation

mode, wherein organisational policies will clearly spell out the elimination of

unethical behaviour and create strict rules of transaction as agreed by both entities

and would be followed by employees from both organisations. It is essential for

organisations conducting this movement that they eliminate individual game-like

behaviour as explained in chapter five. This is essential so that individuals adhere

to the strong situation and do not try to make it weak on the individual level so that

they can indulge into psychological games to get their required pay-offs. It is thus

suggested that organisations willing to conduct these movements, also look into the

employment of the right people into positions wherein the individuals have to

transact at an inter-organisational leveL If individuals working in these positions

are indulging into game-like behaviour they should be sent for training or if it is

serious than if the individual agrees to sign a psychological contract, get them to

meet a Transactional Analysis practitioner.

5. Quadrant III »» Quadrant I: In this scenario, the buyer is not satisfied with

the outcome of the relationship or transaction. The buyer wants to get back into his

position of power or at least try to get as much advantage out of the relationship.

The movement will be conducted by using any of the strategies put forth by various

127

Research Direction

researchers for buyer power, striking is the work conducted by Porter (1998). Also,

looking at this movement from the perspective of this research, the buyer may try

to show game-like behaviour as depicted in Chapter 3, to gain a powerful position

or gain advantage in the relationship.

6. Quadrant III »» Quadrant 11 : In this scenario, the supplier wants to exit from

the relationship, hence will try to move to the quadrant, wherein the supplier shows

dissatisfaction with the buyer. The buyer is already in a dissatisfied state and so it is

easy for the relationship to end. The relationship will keep going only if anyone of

the entities makes an effort to rejuvenate the relationship. The supplier may use any

of the instances of game-like behaviour depicted in chapter 3 to exit the

relationship and move into quadrant 11.

7. Quadrant 11 »» Quadrant IV: In this scenario, both the entities are dissatisfied

with each other, hence the easiest option out is that of exit, but the other option

which is difficult, but not impossible will be that of creating interdependence. As

shown earlier the movement to the fourth quadrant is about creating the

interdependence by instilling governance mechanisms, and eliminating game-like

behaviour. In the previous movement to the fourth quadrant both parties were

willing to move even when one of them was in a state of satisfaction and power,

hence it took quite an effort on the part of the powerful entity to create a real

partnership. In this case, both parties are dissatisfied, hence it is the final attempt on

their part to reconcile and try to achieve interdependence before they can exit. This

again calls for instilling governance mechanisms ( Jap, 2000; Powell 1990; Heidi,

1994) and eliminating game-like behaviour through creation of a strong situation

for employees working in functions having inter-organisational transactions.

8. Quadrant IV»» Quadrant 11 : This scenario though not a common one, might

exist if for some reason the two entities decide to call it a day and exit the

relationship. This is a very difficult movement, directly from a state of

interdependence to independence and will have a lot of financial implications

involved. The researcher feels that the movement will occur over a period of time,

but will be in stages, wherein the entities will try to move from Quadrant IV to

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Research Direction

Quadrant I (buyer getting the power), or to quadrant III (supplier getting the

power), followed by the movement to quadrant 11 in order to exit.

9. Quadrant 11 »» Quadrant I: In this scenano, the buyer moves from a

position of dissatisfaction to position of satisfaction. The movement is in terms of

the buyers game-like behaviour to get back the power position by depicting

dissatisfaction to the supplier and taking hold of the transaction on its own terms

and conditions.

10. Quadrant 11 »» Quadrant Ill: In this scenario, the supplier moves from a

position of dissatisfaction to position of satisfaction. The movement is in terms of

the suppliers game-like behaviour to get back the power position by depicting

dissatisfaction to the buyer and taking hold of the transaction on its own terms and

conditions.

11. Quadrant IV»» Quadrant I : In this scenario as described previously, the

buyer decides to move out from the state of partnership and interdependence to

position of buyer dominance.

12. Quadrant IV»» Quadrant III : In this scenario as described previously, the

supplier decides to move out from the state of partnership and interdependence to

position of supplier dominance.

As explained above, these movements affect the relationship and eventually will determine

the longevity. The relationship matrix has still not been validated in industrial settings.

However, the researcher will try to provide some further explanation about the use of the

matrix using a few instances from the interview data. This is in no way a thorough

validation and should be seen as an initial analysis of the proposed relationship matrix.

These cases are explained in the next chapter. The researcher has also not sought to use the

case-study approach for this exercise as the information available is not extensive. It

should now be clearer to the readers that this research was not conducted with the objective

of proving any particular theory or concept, but was more geared towards exploring the

vast knowledge surrounding buyer-supplier relationships and figuring out whether there

was still a small piece missing from the puzzle.

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Research Direction

5.5 Summary

In this chapter the researcher presented his framework for studying buyer- supplier

relationships and in this process has sought the use of established concepts in buyer

supplier relationship literature. It has been suggested that the established theories and

concepts could be used once the initial understanding of the relationship is sought by using

the proposed framework. The next chapter presents some explanation of the use of this

framework by referring to interview data.

130

Making sense of the Research

Chapter 6


Aim: The aim of this chapter is to investigate whether the ideas depicted in chapter 5 could

be put to practice. The chapter presents the information in the format of a few case-studies

to depict the lIse of the information derived from this research.

6.1 Introduction

The researcher has explained the concepts of Transactional Analysis and the use of

Transactional Analysis for studying buyer-supplier relationships. As set in the initial stages

of this research, the aim was to have a better insight into buyer·supplier relationships and

not the detailed study of game-like behaviour, the discussion about game-like behaviour

has been restricted to chapter 6, and henceforth game-like behaviour will be discussed as

one element of the relationship issues in buyer-supplier relationships. In chapter 5, the

researcher presented a concept map which brought together the different concepts

presented by the researcher in the previous chapters into a cohesive framework

highlighting the process of the relationship. Generally, what is seen in a relationship is the

then and there transactions, and the insight behind that transaction is lost. The researcher

has tried to capture that insight in this research, and presented the buyer- supplier

relationship scenario as a process of various concepts and perspectives which finally

culminate into the game-like behaviour. This makes the study of game-like behaviour

paramount not only in its individuality but also as the culmination of the transaction

through the different processes. Not every process or perspective will be used for each

culmination, hence the objective of this part of the study is not only the game, but to try

and explain the dynamics of the transactions using the concept map, ig. 5.4, and the

relationship matrix proposed in Chapter 5. This involves studying the most common game

like behaviours and back-tracking the transaction and deciphering the reasons or

perspectives for the behaviour.

131


6.2 Initial Proposed Methodology

The concept map depicted in fig. 5.2 was an important start to the study of the concepts

affecting supply chain relationships. The concept map provided insight into the possible

process occurring in any organisation when it transacts with another in a supply chain

relationship. The concept map though not validated on its own (as explained earlier)

provided a fertile ground for focussing the study on the behavioural aspects of the

relationship and the implications of the behaviour towards the future of the relationship.

The dynamics of the behaviour are depicted in fig. 5.4, which represents two organisations

transacting with each other. The concept map and fig 5.4 highlighted the aspects of the

transactions, but the information about the motives for the transaction was missing. This

led to the development of the relationship matrix (fig. 5.5), which depicts the motives for

the transactions based on levels of satisfaction of the two transacting entities, as well as the

outcomes of the transaction. The concept map and fig. 5.4 fit in between the motives and

the outcomes. Hence, together these three figures depict why the transactions are

conducted, how they are conducted and what happens after the transactions are over.

The researcher proposes a methodology, which he has named as being the "Initial

Proposed Methodology" to study the transactions and the behaviours occurring in buyer

supplier relationships. The methodology takes into account the knowledge generated about

buyer- supplier transactions taking into account the three above mentioned figures. The

methodology is used to analyse buyer- supplier transactions and hence their relationships.

The methodology consists of three stages to analyse the transactions. The third stage is a

subset of the second stage , and needs to be used only in certain conditions. The

methodology is shown in fig. 6.1. The three stages of the methodology provide analysis of

the relationship using a transaction and showing how the relationship changes over the

time frame of the transactions, the actual dynamics of the transaction and the effect the

humans have in the transaction and also the effect the transaction has on the humans.

132

Relationship Analysis

( lIse Relationship Framework)

Transaction Analysis

(use transaclional Analysis- structural modelling)

G am e-like behaviour

(use structural modelling and Drama Triangle analysis)


I. M acro- level analysis

11. M icrolevel analysis

11 ". psychological level analysis

Figure 6.1 : Initial proposed methodology

As seen in the figure, there are two stages in the methodology: I) Macro- level and 2)

Micro- level. The Micro-level stage has an additional sub- stage, which is the

psychological- level analysis.

I} Macro- level analysis: The initial phase of the analysis is not an analysis of the

dynamics of the transaction, but more of the relationship. The transaction forms a cause for

the effect it has on the relationship. The relationship framework looks at the changes in the

relationship on a macro level. The analysis begins with determining the quadrant in which

the relationship was prior to the change inducing transaction. This is done by looking at the

level of satisfaction the buyer and supplier have with the relationship. This information can

be found out by communicating with people working in the purchasing and sales

departments of transacting companies. Also, if the number of transactions (game-like

behaviours or change inducing) occurring between the entities has a high frequency it

would suggest that both entities are dissatisfied and keep trying to achieve a better level of

satisfaction with each transaction conducted. When the transaction occurs, the levels of

satisfaction change and hence the relationship status changes, which is represented by the

change in quadrant. The final outcome of the transaction leads to the final levels of

satisfaction and this decides which quadrant the relationship status ends in after the

transaction completes. When the transaction is being conducted, the relationship may go

through several quadrants before ending in one quadrant for some time before another

transaction from either entity changes the status quo. Also, since each transaction may

133


have its own time frame for completion, sometimes the relationship may be in one

quadrant momentarily, and sometimes if the transaction is taking weeks, months or even

years to complete, the relationships may be in specific quadrants for longer times.

11} Micro-level analysis: This step of the analysis looks at the micro level dynamics of the

transaction. It studies each stage in the transaction from the perspective of Transactional

analysis to gauge how the humans involved are conducting these transactions and the

psychological underpinnings of their actions when subjected to strong or weak situations.

This stage depicts the dynamics of the transactions using the structural modelling

capabilities of Transactional Analysis.

11a} Psychological - level analysis: This step of the analysis comes into existence only

when the transactions depict game-like behaviour which alters the power status of the

entities after the transaction is conducted. For example: The buyer is in the persecutor

mode and controlling the relationship with its power while the supplier is in the victim

mode. When the transaction completes, the supplier gets power over the buyer and hence

the supplier switches to persecutor mode as it starts controlling the relationship and the

buyer moves to the victim mode. As described above, if the transactions brings about this

switch, then the dynamics of the transactions are studied using the method of Drama

Triangle Analysis.

6.2.1 Using the methodology

The concept map as discussed in the previous chapter includes different concepts, which

have been brought together to study the processes underlying the buyer-supplier

relationship. Most of these processes will have no direct validation for the cause and effect

of their processes in this thesis. But most of these concepts have a vast reference base

associated with them and it was not in the objectives of this research to study these

concepts, but more to use these concepts as they have been published in various literature

sources and take validation at face value. The use of the concept of exit/voice in

conjunction with the concept of power regimes, has been done through the use of intuition

during the literature review. Hence, validation has not been sought for it. The idea behind

the use of these concepts is more about presenting a new insight than validating whether

certain processes occur to a certain degree or not. Other researchers who would be

interested in validating the processes through statistical means could take up the validation.

134

Making sense o/the Research

This may change the concept map in the future, but as this research presents it in a more

intuitive form, the research presents a valuable starting point for further academic work in

this field. Looking back at the most common transactions in buyer-supplier relationships

which are termed as game-like behaviour and which are to some extent the cause of

discontent and conflict in the relationship, this process map is generic and the reader would

have to look at each transaction as given in chapter five and use that information to

decipher each transaction. In this chapter the researcher has presented the usefulness of the

initial proposed methodology by attempting to explain a few cases (interview data and

literature sources). This exercise will also try to give a reasonable answer for the research

questions highlighted in chapter four. Since, the data collected in the first phase was in the

form of critical incidents, some of the critical incidents will be used as data for this

exercise. Each critical incident identified by the respondents will be considered as one

case-study, as the objective of the exercise is to try and explain the dynamics of the

transactions (critical incident). In terms of a sample the data set for this exercise does not

present a pattern, but the researcher thinks that it is more important to figure out whether

the framework is useful, than try and match the framework to a certain data set. Also, not

all the cases are concerned with game-like behaviour, but more with depicting transaction

and relationship dynamics.

In the next section, the researcher has analysed six cases usmg the initial proposed

methodology generated in chapter six, and the Transactional Analysis concepts studied in

chapter four. The procedure for analysis is depicted below:

Case Context: This section of the case presents information on how the data was collected

for a particular case, the respondent and the interviewer for that case and any particular

comments made by the respondent.

Transa,ction Synopsis: This section presents the particular transaction being analysed. It

presents in brief the dynamics of the transaction. There is also detailed information in

terms of behaviour shown by the entities and the outcomes.

Analysis : this section presents the macro-level analysis of the transaction, using the

relationship matrix (fig. 5.5) proposed in chapter five.

135


Transactional Analysis modelling and Drama triangle analysis: This section presents, the

micro-level analysis of the transaction, using tools derived from Transactional Analysis.

6.3 The Cases

6.3.1 Transaction 1: "Got You"

Case Context: The respondent in this case was the owner of the company. The company is

a SME supplying crankshafts to a very large automobiles manufacturing company in India.

The researcher contacted the owner for an interview, which was held in the premises of the

company at 6.00 p.m. after office hours. The names of the person involved in the interview

and the organisations cannot be displayed here due to the sensitive nature of the

information. The researcher explained to the respondent that he was studying buyer

supplier relationships and asked the respondent to describe his relationship as a supplier to

the large automobile company. The respondent explained how the relationship was formed

and the various investments done by the supplier company to build the complete operations

of the company around the requirements of the buyer company. The researcher then asked

the respondent about any issues or problems encountered by the supplier in this

relationship. The respondent explained that in the past small issues were always sorted out

on a personal basis between the respondent and the purchasing representatives of the buyer

company. He also said that payment was a constant issue as the buyer company never paid

on time. The researcher then asked the respondent to comment on the future of the

relationship, wherein the respondent though not ready to divulge any more information

relented and explained to the researcher how the buyer company was changing its supply

strategy, which was going to affect the supplier company to a great extent and how the

supplier company was thinking of dealing with the new development in the buyer-supplier

relationship. This new development in the relationship has been analysed by the researcher

below using the frameworks and Transactional analysis.

Transaction Synopsis: The supplier has invested in resources for the last 4 years and made

a business surrounding the supply. The buyer is very powerful: so dictates, contracts only

once, decides price and does not negotiate or re-contract later, the supplier has to abide

with the buyers rules. Recently the buyer has decided to create a new supplier network

with only two companies as first tier suppliers, then it will streamline previous supplier

136


network by de-listing a lot of suppliers abruptly without notice and force the remaining to

act as second tier suppliers potentially reducing supplier margins. The buyer has a

commercial stake in both the first tier companies.

Supplier Action: The supplier knows that the buyer is powerful, and that it will lose the

suppl y contract within a years time, so due to the pressure and fear of losing out, the

supplier has decided that it will attempt to increase its personal power. The Supplier has

developed· the ·ability to gain a power position. The supplier made parts supply

indispensable, and then checked whether any competitors could deliver. Once it was

known that there was no competition the supplier ramped up the price by 40%, which the

buyer had to comply with for a short term as it did not want to stop the supply. The

supplier meanwhile is looking out for other buyers and trying to integrate horizontally. The

buyer will have to comply with the supplier process for a few months until it can develop a

new supply source.

Analysis: Studying the information available for this case and usmg the relationship

matrix, it is possible to ascertain that for some time, the relationship was in quadrant i, as

the buyer was satisfied with the relationship and the supplier even though dissatisfied had

agreed to the status quo. For a long time the relationship continued in quadrant i even

though there were moments when the supplier would have voiced disagreement to the

buyer, but eventually did not try to change the status of the relationship for fear of losing

the business. The buyer decided to move the relationship to Quadrant 11, when it asked the

supplier to modify its position in the supply chain from a first tier to second tier thus

reducing the supplier's margin. If the supplier did not comply it would be de-listed and the

buyer and supplier would exit from the relationship. The supplier eventually knew that in a

few months time it would have to exit as continuing the relationship was not financially

feasible, so the supplier decided to change its strategy for the last few months. As written

earlier the supplier-collected information about the buyer's other sources of supply for the

product that it was supplying. On finding that it was difficult for the buyer to find a source

of supply soon, the supplier decided to take the relationship to quadrant III by increasing

the price of the product by 40% as it knew that the buyer had no other alternative. Thus for

a few months the supplier was able to move the relationship to Quadrant Ill, but knew that

eventually it is going to move to quadrant 11, when the buyer finds an alternative source of

supply and then ends in an exit relationship.

137


This analysis sounds rather simplistic, but if the reader would delve into the underlying

processes in this transaction, there are elements of a power struggle, the use of resources to

achieve maximum advantage, the use of porter's strategy and finally decisions based on

exit-voice strategy which determines the health of the relationship. Also, as said earlier it is

not the objective of the researcher to present the best relationship situation or critique on

the disadvantages of certain relationship situations as stated in Carter (1998), Lamming

(1995), etc. In this case two game-like behaviour are shown:

I. The first by the buyer firm, when it decides the strategy to make more money by

changing the supply chain structure. Even though this may seem to have no direct

psychological implications and look a very rational strategic move, it can still be

modelled using Transactional Analysis. The psychological transactions are more of

the covert transactions shown by the buyer in depicting its power position to the

supplier.

2. The second game-like behaviour is shown by the supplier firm, when it sees that

the buyer has no alternative to procuring the product and increases the price to get

an advantage for a short duration. This again may look as a very rational

transaction, but this has the underpinnings of a psychological transaction. The two

game-like behaviours are actually parts of the complete transaction which starts

with the buyer transacting from the parent mode, the supplier reacting from the

parent mode thus making it a crossed transaction and then the buyer again getting

control of the situation and ending it in the parent mode. This type of game-like

behaviour has been noticed in various literature cases reviewed and interviews

conducted by the researcher.

Quadrant I »» Quadrant 11»» Quadrant Ill»»> Quadrant 11

Transactional Analysis Modelling

I As the buyer is a powerful entity, it is in a position to control the relationship. Hence, it

has decided to streamline its supply base for strategic gains, but at a level of discomfort for

the suppliers. The buyer then asks the supplier in the case to change status from first tier

138


supplier to second tier supplier. This is an adult to adult transaction and represented by I.

But it does send out an ulterior message, represented by 2, which says that we are

powerful, and you better listen to us. (see figure 6.2)

2. The supplier does not accept this, but does not communicate about this to the buyer. The

supplier wants to get back at the buyer, hence searches for a way to get even. The supplier

recognizes that the buyer is dependent on it for the parts it is supplying. The supplier wants

to exit from the relationship, but before doing that wants to get even with the buyer. Hence,

the supplier ramps up the price of the parts by 40% and threatens to quit. This transaction

occurs at an adult to adult level, represented by 3. The ulterior transaction is represented by

4, where the supplier has the power and represents "Got you".

3 The buyer knows that at least for a short time, until it can create a supply base for the

parts, it has to comply, hence accepts the price increase, which is again a adult to adult

transaction and is represented by 5 .

Supplier

..... ' . ......

'. '. ". ".

..' .... ..'

..to'· I

.... ....•. 3 " ~

4

Buyer

Figure 6.2: Got you

The behaviour depicted by the supplier in this case has been noticed in various forms the

cases of suppliers using lock-in strategy or increasing the prices' after the contracts have

139


been signed and the buyer becomes dependent upon the supplier for supply. The different

methods have been discussed in cases 3 and 4 in this chapter.

Drama Triangle Analysis

This behaviour can also be studied using the Drama Triangle Analysis technique used in

Transactional Analysis. The Drama Triangle Analysis technique provides a psychological

perspective to the transaction. It is eligible only for transactions or behaviours, which have

the capacity to be termed as game-like behaviours. For regular transactions, even though

there may be crossed transactions, it is not necessary that a switch would have occurred in

the roles being played by the two entities in the relationship. Hence, in the case of buyers

and suppliers it is interesting to note the roles the two entities are in before the transaction

or behaviour is conducted, and the roles they are in after the event. The switch of roles and

the behaviour shown by the entities provides greater insight into the type of relationships

the two entities have with each other, and what to expect in the future. For ego A buyer

may have a tendency to start the transaction in the rescuer mode, by offering various

incentives to the supplier to start supply, and eventually as the supplier is locked in, the

buyer switches it's mode to that of persecutor and changes requirements of the contract or

adds some more conditions, which the supplier has to follow. By using the drama triangle

analysis, the supplier can assume that it is the tendency of a certain buyer to move into the

persecutor mode later in the relationships, hence, the supplier can make a decision either I)

not to enter into a relationship with the buyer, or 2) change it's behaviour so that it can

gauge the moment of switch and pull the switch itself to get the upper hand in the

relationship.

In this transaction, the buyer starts the transaction in a persecutor mode, wherein the buyer

exerts its power, and the supplier takes the role of the victim, wherein it is less powerful

and has to abide with the buyer's requirements. But as the transaction proceeds and the

switch occurs when the supplier ramps up the price. The supplier knows that the buyer is

completely dependent on it for the parts, the supplier switches from the role of a victim to

that of the persecutor. The buyer now occupies the role of the victim as it has to comply

with the supplier's requirements until it can create another switch to reverse roles.

140

1) Buyer

p ,..---------, R

V

Supplier

2)


Supplier p ,--------, R

V

Buyer

Figure 6.3 Drama Triangle analysis of transaction I

6.3.2 Transaction 2: " Not Again"


a distributor of Fast Moving Consumer Goods (FMCG), for eg: washing powder,

processed food, tea, coffee, etc. in India. In this case the respondent's company was in the

role of a buyer. The researcher contacted the owner for an interview, which was held in the

premises of the company at I 1.00 a.m. The names of the person involved in the interview


information. The researcher explained to the respondent that he was studying buyer

supplier relationships and asked the respondent to describe his relationship as a buyer to

the large FMCG company. The respondent explained how the relationship was formed and

described the operations . The researcher then asked the respondent about any issues or

problems encountered by the buyer in this relationship. The respondent explained that in

the past small issues were always sorted out on a personal basis between the respondent

and the sales representatives of the supplier company. He explained a few issues, which

have been depicted in the transaction synopsis. The researcher then asked the respondent to

comment on the relationship, wherein the respondent was more than eager to tell the

researcher how the supplier company had suffered after the respondent's company had

severed relationships wit the supplier. The dynamics of this relationship has been analysed

141


by the researcher below using the framework and Transactional Analysis. The relationship

does not suggest the presence of game-like behaviour, but the use of the framework and

Transactional Analysis is useful in studying how the relationship changed over time.

Transaction Synopsis: In this case, the buyer is a distributor and the supplier is a very

large Fast Moving Consumer goods manufacturer. The supplier in this case being the

powerful entity ruled the relationship. On interviewing the owner of the distribution

company, the information received was that the supplier being a big profitable multi

national firm exerted its power during all transactions. The distributor company virtually

had no say in any transactions. The distributor company was dissatisfied with the

relationship and would protest against the supplier's style of working. The distributor

primarily was unhappy with the following scenarios:

I) Advance signed cheques were taken from the distributor.

2) Consignment contained material the distributor did not want and could not sell.

3) Distributor could not reject or send back unwanted material.

4) Payment to the supplier was done as soon as consignment was despatched and there

was no credit given to the distributor.

The distributor finally decided to leave the supply network as margins were reducing and

the supplier was too high-handed. After the distributor left the supply network, the supplier

had to change distributors 6 times in 3 years as they could not set up a new distribution

network. The supplier then asked the previous distribution company to join the network but

the distribution company has found another supplier company and has refused.

Analysis: Studying the information available for this case and usmg the relationship

matrix, it is possible to ascertain that the relationship was in Quadrant III for a long time,

as the buyer was dissatisfied and the supplier being powerful exerted power to control the

relationship and get the required pay-off. The buyer finally decided to move to quadrant 11

in order to exit the relationship. The only strategic move in this case was the exit, as the

supplier company was not ready to move to quadrant IV and the buyer was not in a

position to move the relationship to quadrant I. Hence, the buyer exited from the

relationship after it was able to get a new supplier. Eventually, the previous supplier was

unable to set up a new distribution network and approached the distributor to reconsider

142


and join the supply network. The supplier was now ready to take the relationship to

quadrant IV or even to quadrant I, but the distributor company refused.

Quadrant III »» Quadrant 1I .................... »»Quadrant IV or Quadrant I


1. The Supplier is a powerful entity, hence controls the relationship as depicted in the

transaction synopsis. Even though, the transactions are always on an adult- to- adult level,

represented by I, the ulterior message represented by 2, is that of power and that the

supplier has to listen to buyer. (see figure 6.4)

2. The Buyer decides to quit the relationship, which it conveys in an adult- to- adult way,

represented by 3. The supplier is in a powerful position and does not care that the buyer

has left.

3. After a few years, the supplier approaches the buyer again, as it has failed in a number

of attempts to create a robust distribution network. This is an adult- to- adult transaction

(4). But the buyer is now in a powerful position, and even though it declines the offer in an

adult- to- adult transaction (5), it actually sends out an ulterior message (6), saying that it is

powerful, and the supplier will have to listen to it in the future if it decides to accept the

contract.

Buyer

.... .... 6 .....

···.1 .•...

.. '

, " '. "

.... ,.' ..'

,ot'" 1

" , .... ·· .. 3 ' . "

Supplier

Figure 6.4 : Not Again

143


6.3.3 Transaction 3: you may be powerful, but . ..

Case Context: The respondent in this case was the sales manager of the company. The

company is a supplier of driver control products in the UK automotive industry. One of the

principal investigators of the "Supply chain alignment" project described in chapter one

had a meeting with the respondent. During this meeting the interviewer briefed the

respondent about the project and asked the respondent whether it was suitable for him to

talk to the interviewer about the relationship his company had with the automotive buyer.

The names of the person involved in the interview and the organisations cannot be

displayed here due to the sensitive nature of the information. The interviewer asked the

respondent to describe his relationship as a supplier to the large automobile company. The

respondent explained how the relationship was formed and the various investments done

by the supplier company to build the complete operations of the company around the

requirements of the buyer company. The interviewer then asked the respondent about any

issues or problems encountered by the supplier in this relationship. The respondent

explained that the buyer regularly forced them as a supplier to keep reducing the costs and

at every contract renewal the price of the parts had to be reduced, which was not

financially feasible for the supplier company. If they did not agree to this requirement from

the buyer, they were warned that they may lose the business. The supplier in this case, used

some game-like behaviour to get back into a powerful situation with the buyer and make

the relationship financially viable for them. The researcher has analysed this information

using the relationship framework and Transactional Analysis.

Transaction Synopsis: While negotiating for the business, the supplier agreed to most of

the terms and conditions set by the buyer and entered into a long-term partnership at

agreed and negotiated prices. Some time after the business relationship had been

established, a lock-in situation had developed which tended to give the supplier more

power. The supplier used objective reasoning backed by tools such as activity-based

costing to justify a pricing increase. In this situation the buyer agreed when presented with

the facts. The transactions took place over a significant time interval.

Analysis: Studying the information available for this case and using the relationship

matrix, it is possible to ascertain that the relationship was in Quadrant I as the buyer was

144


satisfied with the relationship and the supplier even though dissatisfied had agreed to the

status quo. The buyer is a large automotive manufacturer, hence is powerful and can

dictate the terms of the relationship. The supplier tries to move the relationship to quadrant

Ill. For this the supplier uses a strategy of lock-in. The supplier agrees to the terms and

conditions of the contract during the negotiation stage and gets the supply contract. Later

the supplier proves to the buyer using costing tools, that it is not feasible to supply at the

contracted price and gives an ultimatum to the buyer either to increases the price or lose

the supply. The buyer cannot afford to lose the supply, hence agrees to the suppliers

demands. The supplier is successful in moving to quadrant Ill. The buyer regains its power

position later when the buyer invites the supplier for an Electronic reverse auction when

the next round of negotiations take place. This type of game-like behaviour has also been

discussed in case no. I.

Quadrant I»» Quadrant III »»Quadrant I


I. Initially power seemed to reside with the buyer and the supplier agreed to all the

requirements of the business at a reduced price in order to win the contract. A series of

transactions occurred, associated with the negotiation and establishment of the contract.

These were conducted on primarily an adult-to-adult basis, shown as transaction 1 in Fig.

6.5

2. After some time the supplier had become closely integrated into the buyer's product

lines. The supplier considered that it was strong enough to ask for a price rise but it had to

be based on some objective data. This is shown as the surface adult-to-adult transaction 2

with an ulterior message of 'now that we (the supplier) have more power, you have to pay

more' shown as transaction 3.

3. A negotiation process took place and the buyer agreed to most of the price increase. On

the surface this is the adult-to-adult transaction 4. However, at a later time it invited the

supplier to take part in an internet auction for the supply of the parts, but the ulterior

message was 'we will get you later' and this is represented as transaction 5.

145

'. .... ". 1 ..... .

... 4

Supplier

.' .. ' ..' .' . ....

.... .," ' ... ' 2 ... 1\ •• ,

,. On

......... 3 ' . ....


Buyer

Figure 6.5 : you may be powerful, but. ....... .


In this transaction, the buyer starts the transaction in a persecutor mode. The buyer exerts

its power, and the supplier takes the role of the victim, wherein it is less powerful and has

to abide with the buyer's requirements. But as the transaction proceeds and the switch

occurs when the supplier ramps up the price. The supplier knows that the buyer is

completely dependent on it for the parts and is locked in the relationship, the supplier

switches from the role of a victim to that of the persecutor. The buyer now occupies the

role of the victim as it has to comply with the supplier's requirements until it can create

another switch to reverse roles.

1) Buyer

p ,.-----, R

V

Supplier

2) Supplier

p ,.-----, R

v Buyer


146


The example demonstrates that the two compames use their perceived power to gain

advantage. The game playing that was taking place was overall damaging to long-term

relationships but maximized the benefit in the short term. The only solution seemed to

expose the games and to encourage the two parties to act in a more interdependent style.

6.3.4 Transaction 4: Electronic reverse Auctions- The Loss Leader

Case Context: The respondent in this case was the purchasing manager of a large

automotive company. The company is a manufacturer of automobiles in the UK. One of

the principal investigators of the "Supply chain alignment" project described in chapter one

had a meeting with the respondent. During this meeting the interviewer briefed the

respondent about the project and asked the respondent whether it was suitable for him to

talk to the interviewer about the relationship his company had with the automotive

suppliers. The names of the person involved in the interview and the organisations cannot

be displayed here due to the sensitive nature of the information. The interviewer asked the

respondent to describe his relationship as a buyer of a large automobile company. The

respondent explained how the relationship was formed and that at the present time

suppliers were given contracts through electronic reverse auctions. The interviewer then

asked the respondent about any issues or problems encountered by the supplier in this

relationship. The respondent explained there were some instances of game-like behaviour

depicted when electronic reverse auctions were conducted. These behaviours have been

explained below. The researcher has analysed this information using the relationship

framework and Transactional Anal ysis.

Transaction synopsis: The electronic auction is an important new means of trading that

has been made possible by the internet. It resembles a reverse bidding process where

potential suppliers of goods or services compete with one another to offer the lowest price.

A deadline on the bidding is imposed on suppliers all of whom can see each other's bids on

the internet. In many respects, electronic auctions change the rules of engagement in

supplier to buyer relationships. The auction process apparently gives greater power to the

purchaser, particularly enabling them to force down prices. However, in reality, suppliers

develop new rules of engagement in order to find ways of exerting and developing their

own power. Discussions were held with a number of buyers who do business by means of

reverse auctions and they were asked to describe qualitatively how suppliers and

147


purchasers behave during the auction. Most of the auctions were conducted in a reasonable

manner although they did not always realize the savings planned and they seemed to do

little for longer-term trading partnerships. However, it does appear that suppliers do

attempt to maximize their power in the relationship with the purchaser in order to

maximize their own advantage. The situational strength in a reverse auction would appear

to be strong in that the rules of engagement are defined and controlled by the purchaser and

there is not much opportunity for supplier discretion other than deciding whether or not to

bid and what price to bid. In discussions with a major producer of motor vehicles the

following procedure was identified at the company:

I. The invitation to bid was issued and a pre-qualification process took place.

2. Only those capable of satisfying the quality and delivery requirements were invited to

bid against a specification issued by the buyer.

3. The auction was limited in terms of time; generally the bidding was slow in the first

half-hour but then speeded up as the time passed and the participants of the auction gained

knowledge of the bid levels from the other participants.

4. As the deadline approached, the bidding accelerated, culminating in a frantic final 5 min

as suppliers decide whether they are willing to reduce their price finally to win the

contract.

The strategies adopted by the suppliers can be surprising and at first sight counter-intuitive.

They are aimed at increasing their own power in relation to the other suppliers and/or the

purchaser.

A variety of games have been observed, of which the Loss leader has been analysed below:

The Loss Leader: The supplier bids very low in the knowledge that, if it wins the order,

the purchaser will be locked in and it will have to purchase spares and maintenance from

the supplier. The supplier is making a strategic judgement about the value of the work

based upon power acquired when the buyer's switching costs are high.

Analysis

Studying the information available for this case and using the relationship matrix, it is

possible to ascertain that the relationship was in Quadrant I as the buyer was satisfied with

the relationship and the supplier even though dissatisfied had agreed to the status quo. The

buyer is a large automotive manufacturer, hence is powerful and can dictate the terms of

the relationship. The buyer invites the supplier to an electronic reverse auction and the

148


supplier has to accept if it needs to keep the supply. During the auction the supplier realises

that in order to gain a powerful position, first it will have to do something to get the

contract. Hence, the supplier bids low (at a loss), and gets the contract. The relationship is

still in Quadrant I, as the buyer is satisfied at getting the supply at such a low cost, and the

supplier is dissatisfied as the supplier is making a loss. But in the long term, the supplier

gets the powerful position, once the buyer is locked-in and the buyer now has to rely on the

supplier for spares and maintenance. At this stage, the supplier is in a position to ramp up

the price and make some profit. Hence, the relationship moves to Quadrant Ill. The buyer

soon gets even with the supplier, when the buyer hosts another reverse E-auction and

regains its powerful position.

Quadrant I»» Quadrant III»»>Quadrant I

Transactional analysis Modelling

A typical case that was modelled using TA for the loss leader is shown in Fig. 6.7. In this

case the flow of information took place as follows:

1. The buyer opens the game by providing the opportunity for the supplier to bid for the

work. Generally this was carried out as an adult-to-adult transaction, although in some

instances, when the buyer exerted power, it was more parent- to- child. This is shown as

transaction 1 in Fig. 6.7.

2. The buyer, which in this case had more power, specified the terms and conditions of the

auction to gain maximum advantage. In that the buyer is setting the rules, this is shown as

the parent-to-child transaction 2.

3. The supplier bids low primarily to win the order but with an ulterior motive of gaining

control at a later stage when the buyer is locked into the supplier. At the social level the

supplier responds from the less dominant position of child to parent, shown as transaction

3. However, there is an unspoken strategy in the supplier to gain some power at a future

date.

149


4. If the game is played over a time period, then eventually the supplier will have some

dominance due to the lock-in situation. If the supplier's strategy works, then it will at some

future time gain power, enabling it to continue social communication as the adult-to adult

transaction 4 while the ulterior unspoken message is parent-to-child transaction 5.

Buyer Supplier

Figure 6.7: The Loss leader


In this transaction, the buyer first starts the transaction in a rescuer role for a brief period,

wherein the buyer invites the supplier to bid in the auction. But very soon, the buyer turns

persecutor, when the buyer exerts its power, and the supplier takes the role of the victim,

wherein it is less powerful and has to abide with the buyer's requirements. The transaction

proceeds with the supplier winning the auction by bidding low, as it wants to lock the

buyer in the relationship. Later, when the buyer relies on the supplier for the spares and

maintenance the switch occurs when the supplier dictates its terms and conditions and the

buyer has to comply. The supplier switches from victim role to that of the persecutor. The

buyer now occupies the role of the victim as it has to comply with the supplier's

requirements until it can create another switch to reverse roles.

ISO

1) Buyer

p .------------, R

V

Supplier

2)


Supplier

p ,-----------, R

V

Buyer


These behavioural strategies are an attempt by the supplier and the buyer to maximize their

benefit. However, it carries a risk for the supplier of miscalculation that could lead to a

future loss of business and for the buyer the risk of increasing costs. Some fonn of

strategic gamesmanship is inevitable in these situations and a code of conduct is needed to

define what is an acceptable game and what is not. Such a code of conduct could be written

into the 'rules' of the auction.

6.3.5 Transaction 5: searching for a quality problem

Case Context: The respondent in this case was the sales manager of a large food

distribution company. The company distributes agricultural produce and other food

ingredients to large food manufacturers in the UK. One of the researchers of the "Supply

chain alignment" project described in chapter one had an interview with the respondent.

During this meeting the interviewer briefed the respondent about the project and asked the

respondent whether it was suitable for him to talk to the interviewer about the relationship

his company had with the food manufacturers. The names of the person involved in the

interview and the organisations cannot be displayed here due to the sensitive nature of the

infonnation. The interviewer asked the respondent to describe their relationship as a

supplier to a large food manufacturing company. The respondent explained how the

relationship was fonned and that the buyer being a large and powerful company controlled

the supply operations. The interviewer then asked the respondent about any issues or

problems encountered by the supplier in this relationship. The respondent explained there

were some instances of game-like behaviour depicted when the buyer did not want a

151


consignment as there was decline in demand or if the buyer had overestimated demand.

These behaviours have been explained below. The researcher has analysed this information

using the relationship framework and Transactional Analysis.

Transaction synopsis: The supplier in the transaction described this scenano. The

company supplies raw ingredients to a manufacturer of food products. To ensure that the

buyer receives a consistent and regular supply of the material a call-off arrangement has

been negotiated. The supplier produces and sends an ingredient to the buyer working to an

agreed forecast of requirement plus or minus an amount depending upon the agreed

tolerance.

Most of the transactions between buyer and supplier were factual and in TA terms adult to

adult within a well-defined etiquette. Game-like behaviour to gain advantage was only

evident in those relatively rare problem situations that arose between the buyer and the

supplier. One particular problem that did occur was a case where the buyer received more

product from the supplier than was actually needed in the period even though the amount

supplied was still within the pre-agreed call-off tolerance. In tenus of situation strength the

buying company operated perfectly within the defined terms of contract and therefore at

first sight seemed to demonstrate a strong situational strength. However, individual buyers

did have some latitude to interpret the framework, leading to some ambiguity in decision

making and thus in reality operating to a weak situational strength. Because of the

contractual agreement they could reject any consignment supplied if they found a quality

problem. The buyer used this clause to increase its power by searching very hard to find a

quality problem of any sort to enable them to reject the consignment. Nearly every time

they did find some quality issue on which to base a decision to reject the goods. The

supplier did not readily accept the situation but, since the buyer was more powerful in the

supply chain and the buyer threatened to look for other suppliers, they accepted the

consignment back. In this situation the etiquette no longer applies and the transaction

switches to a parent-to-child situation with the buyer playing a calculated game.

Analysis:

Studying the infonuation available for this case and using the relationship matrix, it is

possible to ascertain that the relationship was in Quadrant I as the buyer was satisfied with

the relationship and the supplier even though dissatisfied had agreed to the status quo. The

152


buyer is a large company, hence is powerful and can dictate the terms of the relationship.

When the buyer gets an excess of raw material due to their own fault of miscalculation,

they do not want to bear stock holding expenses, hence they have to return the

consignment back to the supplier. This is not possible on a general basis; hence the buyer

takes the relationship to Quadrant 11, where he shows dissatisfaction, by letting the supplier

know that there is a quality problem in the consignment. Both the parties know that the

consignment is perfectly all right and the buyer is simply exerting power. In this case, the

buyer does not want to exit the relationship, but depicts it in that way to the supplier. The

supplier has two options: to exit or to accept the buyer's powerful position and take back

the consignment. Hence, the supplier decided to accept the consignment back, and the

relationship moves to Quadrant I.

Quadrant I»» Quadrant 11 »»Quadrant I


Although the transactions have to be estimated it is possible to plot out the interaction

between supplier and buyer (from the buyer's perspective) using the TA terminology:

I. The initial transaction is as follows: a call-off instruction indicating the quantity required

as per prearranged forecast was sent by the buyer to the supplier. This is modelled as the

adult-to-adult transaction I in Fig. 6.9

2. The supplier responded by supplying the called-off quantity of goods. This is again

modeled as an adult-to-adult response to the buyer as transaction 2.

3. The buyer had miscalculated the amount needed and there was a considerable over

supply. There was a significant number of transactions that took place inside the buyer

organization between purchasing and senior management about what to do about the

over-supply. This is shown as transactions 3 and 4. In transaction 3 there was an adult-to

parent message from the purchasing department to the dominant coalition in the business.

The dominant coalition took a critical parental stance instigating the parent to-child

transaction 4 to the purchasing department. The message from the dominant coalition was

to find a means of rejecting the delivery. A search for a mechanism to reject the delivery

was instigated and a convenient reason found.

153


4. A message was then sent to the supplier, indicating with reasons why the batch was

being rejected. On the surface this was an adult-to-adult transaction, shown as transaction

5, but at the psychological level this was a powerful parental injunction and the underlying

message was that this was the supplier fault and problem, shown as transaction 6.

5. The supplier, in a less powerful position, indicated that they would take back the

consignment. Although they did not think it was justifiable, they took it back primarily to

maintain the relationship. This is shown as transaction 7 while the underlying ulterior

message is 8, in which the transaction is of child to parent, where the supplier accepts that

it is less powerful and agrees to what the buyer is asking for.

Supplier

1

" "

" .,'

.' ,.'

,.' ......

..... 8.·' .. ' .'

7

A

Buyer

--....... " .' \ " , , , , , ,

I I 3 ~ ,

"

I , , , , I , , ,

4 : , , , , ,

Figure 6.9 : searching for a quality problem

In this situation the buyer had the power and the supplier did not want to damage the

business relationship. The problem with the behaviour was that it lowered trust and

encouraged both parties to continue to seek opportunistic behaviour in the future. The

framework and culture at the buyer company was encouraging the buyers in the purchasing

department to adopt strategies to gain short-term advantage at the expense of longer-term

benefit.

154


6.3.6 Transaction 6: "We can play the game too".


a SME supplying heat treated material and tooling to automotive companies in India. The

researcher contacted the owner for an interview, which was held in the premises of the

company at 8.00 p.m. after office hours. The names of the person involved in the interview


information. The researcher explained the respondent that he was studying buyer- supplier

relationships and asked the respondent to describe his relationship as a supplier to large

automobile companies. The respondent explained that relationships were generally fine

and operations were conducted as per the requirements of the buyers. The researcher then

asked the respondent about any issues or problems encountered by them as a supplier in

this relationship. The respondent explained that in the past small issues were always sorted

out on a personal basis between the respondent and the purchasing representatives of the

buyer company. He also said that payment was a constant issue as the buyer company

never paid on time. The respondent did mention some instances when buying companies

tended to conduct unethical behaviour or depict game-like behaviour when they had

overestimated demand or their sales were declining. The information provided by the

respondent has been analysed by the researcher below using the frameworks and

Transactional analysis.

Transaction Synopsis: The supplier has discontinued supply to a major automotive

manufacturer as it did not agree with the buyer's style of working. It retained its position

by finding other buyers. The buyer firm is a large automotive company in India, which is

in a powerful position in the supply chain and can dictate supply terms and conditions to its

suppliers. In this transaction, the supplier was not happy with the buyer's style of working

and when it was successful in finding another buyer, it exited from the supply relationship.

During the duration of the relationship one of the recurrent situations the supplier had to

face with the discontinued buyer is:

I) On many occasIOns the buyer gives wrong order or has surplus inventory as

business drops, so the purchasing department of the buyer rejects material on

quality grounds even though it is of good quality.

155


2) The supplier has to accept and even pay for transporting rejected material back to

supplier works, as the buyer is powerful.

3) Sometimes the supplier gets even. The supplier takes back rejected consignment

and holds it in stock because he knows that the buyer will have a shortfall in a

couple of months and then when the buyer requires more quantity in a short time,

the supplier sends rejected consignment and buyer has to accept the material.

4) In another case, the supplier keeps postponing getting back the material and when

the buyer faces a shortfall, the buyer accepts rejected material and sends a letter

saying that it is only this time that they will accept the rejected material due to a

very small deviation, but will not accept at a later stage. This case repeats

frequently.

5) In one more case, the supplier has contacts in the buyer firm and gets information

when the actual shortfall will occur, so the supplier keeps rejected material locally

near the buyer and when shortfall occurs sends it to the buyer at an inflated price.

Analysis : Studying the information available for this case and using the relationship

matrix, it is possible to ascertain that the relationship was in Quadrant IV for a short time,

and then the buyer resorts to shifting to quadrant I to exert power. This can be ascertained

as the buyer and supplier were generally satisfied with the relationship and even though

there was a certain amount of discontent on the part of the supplier, both the entities were

happy about the relationship. This level of satisfaction and trust was broken when the

buyer exerted power in order to reject the consignment, which made the supplier

dissatisfied taking the relationship to quadrant I. When this happened the supplier firm

tried to shift to quadrant Ill, which it was successful for a short time. As shown above in

the transaction synopsis, the supplier uses various strategies to move to quadrant III . The

ongoing fluctuation in the relationship of moving from quadrant to quadrant was not

agreeable to the supplier and so the supplier finally decides to exit from the relationship,

but this was done only after it had gained another buyer for its product. In this relationship,

the supplier was completely aware that it could not stay in quadrant III for an extended

time. If the supplier would not have been able to find the buyer for its product, it would

have kept on the movements or decided to remaining in quadrant I and maintain it as status

quo.

156


Quadrant IV»» Quadrant I»» Quadrant Ill»» Quadrant I»» Quadrant IV»>

Quadrant I»» Quadrant III ........................ .

Another aspect of this relationship analysis is the use of situational strength. In this case,

the buyer firm has a strong situational strength, wherein it has conveyed to its employees in

the purchasing department that in cases of surplus inventory or the company losing sales,

excess inventory should be returned to the supplier. The process of doing this is manifested

on an individual level, by weakening the situation at the departmental level. In a previous

case, earlier in the thesis, the readers have seen another manifestation of the same issue. In

that case the consignment is rejected on quality grounds by the purchasing department of

the buying firm, when the people in the buying firm know that it is a perfectly good

consignment. Similarly, at the supplier end, the decisions to counter these situations are

taken by the owner of the firm ( as it is a small firm), the situational strength is weak for

the owner and this brings out the innovations and ideas that the supplier firm uses to try

and regain its power position.


The game-like behaviour shown in this case continues after the behaviour depicted in the

prevIOus case.

I. The Buyer finds a quality problem and rejects the good consignment as it has

miscalculated the demand for the parts. The buyer transacts in an adult to adult way (I),

but the ulterior message (2) depicts its power and that the supplier has to abide by whatever

the buyer requires. (see figure 6.10)

2. The supplier accepts the buyer's requirement and takes back the consignment (3). The

supplier is not happy with the transaction. In transaction 4 there was an adult-to-parent

message from the sales department to the dominant coalition in the business. The dominant

coalition took a critical parental stance instigating the parent to-child transaction 5 to the

sales department. The message from the dominant coalition was to find a means of

delivering the same goods again, without scrapping them. A search for a mechanism to

send delivery was instigated and a convenient reason found.

157


3. The Buyer finds a shortfall in supply to meet demand targets, and hence approaches the

supplier for increased supply in a short time (6). The supplier is now in a powerful position

and hence, tells the buyer that the only possible solution would be for the supplier to send

the previously rejected consignment at a higher rate as it had incurred the costs of shipping

and holding the inventory (7). The buyer and supplier both know that the consignment was

of good quality and the buyer agrees. The supplier sends the ulterior message, "We can

Play the game too" (8).

, "

Buyer

..... " "

'" "

7 ..... " " ",

.~ ..... " .. '

'" ,.'

" "

.' .,'

"I'S

.....• .......

... 6 " '"

"

2 "",~

Supplier

Figure 6.10: We can play the game too


, , , .,. '. , \

, , , ,

, , , , ,

, , I , , , , ,

In this transaction, the buyer starts the transaction in a persecutor mode, wherein the buyer

exerts its power, and the supplier takes the role of the victim, wherein it is less powerful

and has to abide with the buyer's requirements. But as the transaction proceeds and the

switch occurs when the supplier knows that the buyer is completely dependent on it for the

extra consignment of parts, the supplier switches from victim role to that of the persecutor.

The buyer now occupies the role of the victim as it has to comply with the supplier's

requirements until it can create another switch to reverse roles.

158

1) Buyer

p ,,------, R

V

Supplier

2)

------ -----


Supplier p

V

Buyer

R


6.4 Discussion

TA provides a very valuable tool for displaying the information transfer between partners

in the supply chain. It can represent the ulterior messages at the same time as the

psychological message and hence provide a rich picture about the transactions. In this

research the concept of games has been used. The games, as developed in TA, are

repeating patterns of transactions that occur betwccn supply chain partners. TA was

applied to organizations by Berne himself with the concepts of character, etiquette and

technical culture matching to the child, parent and adult states. However, games in TA are

generally carried out at an unconscious level and relate to learnt patterns of behaviour and

to re-enforce beliefs about the self. Between organizations the games are often more

conscious and planned actions corresponding to unspoken transaction strategies.

Rather than call these games it may be better to call these deliberate strategic manoeuvres.

The information modelling capability of TA provides a rich picture about what is being

verbally and non-verbally communicated. It is also possible to identity transactions inside

the organization that match the parental judgements, the logical adult and the emotional

child. One difficulty in using TA is the interpretation of which part of the ego state the

messages are coming trom. To a considerable extent the theoretical base of TA does

provide guidance about recognizing whether it is a parent-to adult transaction or an adult-

159


to-adult transaction, etc., and it was judged that, as organizational practitioners gained

more experience, it would become easier to identity clearly the patterns of transaction.

From the field work in organizations it does seem likely that there are only a limited

number of games that occur in supply-chain interactions. There would be considerable

value if this could be verified and to determine what these patterns are. lt would also be

worthwhile to determine whether these organization games match the Berne games. An

assumption of this research is that organizations can be modelled in a rather similar way to

the individual in that there are parental, child-like and adult transactions. Whether you

identify the organization in the same way as the individual or not it was clearly observed in

this research that there were parental-type transactions, child-like transactions and adult

like transactions regularly taking place within anyone organization. lt is difficult to

measure the patterns and match organisational games to games described in Transactional

Analysis. The difficulty stems from the fact that in order to record the exact transaction and

observe human behaviour during the transaction, the researcher should have permission

from the respondents to be present during the transaction. Getting the permission to do so

is in itself a difficult task as the human behaviour depicted during the transaction is

sensitive information and a very personal experience. To record that experience needs the

Humans in the transaction to be comfortable with the idea that someone is observing every

move they make or every expression they show. Even though the humans give permission

for the researcher to be present, it is not guaranteed that the respondents will show their

true behaviour in those circumstances. They may alter their behaviour if they are not

comfortable with someone observing them. Also, matching the game-like behaviour to

Transactional analysis games needs some assumptions as described in chapter four.

An important question is: Once game-like behaviour is identified, what can be done about

these rather negative game-like patterns? It is not even obvious that any company would

actually choose to be up front and to eliminate these games particularly if it is gaining

some strategic advantage and power from them. All the parties in the transactions have to

see these games as being negative before any concerted action can take place to eliminate

the game-like behaviour, only then the therapeutic methods of TA would be appropriate.

Being aware of the game and having a deliberate strategy to interrupt the pattern of

transactions once identified would end the games. Also using governance mechanisms

similar to those defined by Sandy Jap to control the incidence of opportunistic behaviour

could significantly reduce the likelihood of games. Finally, the research has shown the

160


importance of power in that the more powerful member generally sets the rules and

controls the game-like behaviour. To eliminate games the use of power must be used

wisely not to overwhelm the other in the transactions. Much of the transaction patterns

appear to be a means of acquiring power in the transaction process, primarily to leverage

the maximum value for the organization. Although by far the majority of the transactions

observed were adult to adult, the incidence of game-like behaviour increased in problem

situations. Where one party wanted to ensure that it did not suffer loss or alternatively

wanted to gain advantage, gaming became obvious.

Now the three questions raised in chapter 4 are considered.

Are transactions between individuals strongly influenced by the situational context and

the power relations in the organizations?

From the case studies the answer would appear to be 'yes'. Where a strong situational

strength has been identified, then the transactions have primarily been at the adult-to-adult

level. However, where the situational strength is weak, then gaming becomes more

available with the dominant partner instigating parent-to-child type transactions.

Interestingly, the longer-term 'ulterior' transactions were primarily instigated by the

weaker partner to gain longer-term advantage.

Where the manipulation of power in the organization is realized as games, is TA a valid

representation of these games?

Certainly, in the case studies investigated, it provides a very useful short-hand

demonstration of the transactions taking place. It adds a new dimension to the

understanding of transactions between organizations since it considers more that just

information flows. It shows the relative strengths and weaknesses of the partners within a

set of transactions, enabling partners to identity problem issues which would not be so

apparent without the TA methodology.

161

-_ .. _-



strength of the situation?

From the case studies investigated, so far very little evidence was found that individuals

instigated games on their own personal account. It is true that games were initiated by

individuals but in all cases this was done to the supposed benefit of the employing

company. Significant loyalty to the company was seen in many cases. However, where

games were played, it was aimed primarily at short-term benefit for the individuals'

company and not for long-term benefit of the partnership. Also, since it was difficult to

collect personal information or actual behaviour through observation of the transaction, it

is not possible to comment whether individuals played their own psychological games with

each other.

6.5 Refining the Methodology

The methodology proposed previously in this chapter (fig. 6.1) has been used to do a

retrospective evaluation of various cases as shown in section 6.3. The methodology has

been useful in depicting the dynamics of the transactions and the subsequent results for the

buyer-supplier relationship. The evaluation does present a nagging question, which is

about the generic nature of the methodology. The methodology proposed presents only a

part of the process that an individual or an organisation will conduct in order to study the

transaction and use the resulting information for analysing their relationship with

respective buyer or supplier. Also, another limitation of the methodology was that it did

not highlight the effect of situational strength and the importance of the concept map in

the general analysis of the case. The concept map has been identified in this research as an

important tool for getting

162

Continue with the No relationship as it is

Yes

Analyse what has happened

oes it align with your expectations and perceptions for your elationship?

Yes

No


Case Context and Transaction synopsis

Mucro level Analysis Use concept map Use Relationship matrix

Continue with the relationship as it is

Analyse why it has happened

Micro level Analysis Use TA modelling Use Drama Triangle analysis

Is the cause external to the organisation

r is it internal?

If, external If, internal

Do you want to change the esult

o you want to change the result

Yes

Continue No with the

... relationship as it is

New transaction

Use organisational development tool5- if cause is organisational policies

Use TA - if cause is individual human behaviour

Fig. 6.12 Methodology for studying buyer-supplier relationships

163


a holistic view of the nature of buyer-supplier relationships and the different variables

affecting the relationship. Focussing on the lessons that have been learnt through the use

of the initial proposed methodology, the researcher has presented a methodology, which he

feels incorporates the solutions to the limitations identified in the proposed methodology

and presents it in a fonn so that it can be used in a generic format. The methodology is

depicted in fig. 6.12.

To use the methodology, the user first identifies the transaction he/she needs to evaluate.

The user then collects all relevant data for the transaction so that he/she has a detailed idea

of what happened in the transaction and what was the result. The user then compares the

result with the perceptions and expectations he/she has with the relationship. For this

analysis the concept map and the relationship matrix are beneficial, as the concept map

presents to the user the different factors, which are affecting the perceptions and

expectations and the relationship matrix provides further insight into the relationship based

on the levels of satisfaction and the strategic movements that occur due to a certain level of

satisfaction. This aspect of comparing the result of the transaction to the inherent

expectations in the relationship ( Macro- level analysis) is an important step as it

highlights the aspect of alignment and the importance alignment plays in the strategy of

maintaining relationships. If the result and the expectations align, then the user decides to

continue with the relationship as it is. If there is no alignment then the user analyses the

transaction for the reasons of the result. For this analysis (Micro-level analysis), the user

uses the techniques of Transactional analysis modelling and Drama Triangle analysis,

which will help in depicting the dynamics of the transaction. This analysis will also

provide insight whether the cause of the transaction and the subsequent result was due to

an external source or an internal source. If the cause has been identified as internal, then it

could either be at an organisational level or at an individual employee level (situational

strength). The decision at this stage would be whether to try and the change the result. If

the answer is no, then the user would continue with the relationship as it is. If the answer is

yes, then the solution would depend upon whether it is at an organisational level or

individual level. If the cause has been identified as an external source, then there is again

the decision whether to try and change the result. If the answer is no, then the user would

continue in the relationship as it is. If the answer is yes, then the user would conduct a new

transaction in order to get a result that would align with hislher expectations from the

relationship.

164


6.6 Conclusion

As seen above, the relationship matrix and Transactional analysis can be converted into a

valid methodology to analyse the problems in relationships. The methodology is also

useful if used as a tool for recommending a change in strategy or for pointing in the right

direction for information in order to change the relationship strategy. The

recommendations or suggestions provided for moving to quadrant IV (partnerships) are

more to do with using existing research published regarding partnership theories and

collaborative practices. Also, as the supply chain relationship research domain increases

with new research published, this methodology will remain a basic tool, and the new

research can be inculcated as a recommendation for strategy change. The above cases

provide the reader some insight into the dynamics of the relationship. One might wonder

whether this can be used only as a reactive tool to analyse situations already occurred, or

whether it can be used in a proactive way to chart out a new strategy. At this juncture the

researcher can suggest that the relationship matrix can be used to chart out the new strategy

for the relationship in the similar way as the analysis of an earlier scenario is done. The

only difference will be that whenever it is decided to move to a particular quadrant, the

processes for that movement will have to be inculcated well in advance. Also, when using

the matrix to decide the next strategy, the entities will have to consider the next series of

steps, similar to a game of chess, as to how their move will affect the relationship and the

subsequent moves the other transacting entity will make. Whether the matrix actually

works as a strategy formulation tool can be decided if a company is willing to use it and

document the results.

6.7 Summary

This chapter has provided the reader some information in the form of a few cases,

regarding the use of the methodology and has suggested some further uses of it. The

researcher also has presented in the analysis of the cases, the use of transactional analysis

and the concepts introduced in chapter 4. The reader may now have an idea about the

evolution of this research and the usefulness of it for studying buyer supplier relationships.

165

The Research Experience

Chapter 7


Aim: This chapter ends the discussion that was started at the start oJ this thesis. It presents

a brieJ summary oJ what the researcher has tried to achieve by conducting this research. It

also presents the limitations oJ this research Jrom the researcher·s perspective and gives

some suggestions Jar Juture work.

7.1 Research Contribution

The validation for this research has been a fonnidable task. The sensitive nature of the

infonnation has been a major hurdle to get recorded interviews and validation from

industry personnel regarding the game-like behaviour depicted by organisations and

individuals. The researcher has thus to rely on the premise that Transactional Analysis is

already a validated theory. Also, the additional validation for use of this theory in

organisational applications, as shown by Hewson and Turner (1992); Jongeward (1976);

Barker (1980); Goldhaber (1976); etc. can be used in the aspect of identifying game-like

behaviours shown by individuals in the finns when transacting with their counterparts in

the supply relationship. The fact of using transactional analysis to locate the existence of

game- like behaviour shown by the organisation as a group takes its validation from

Berne's "Theory of Dynamics of groups"(Beme,1963). The aspect of an organisation

having scripts and culture strengthens the argument that the organisational culture could be

used as a base for building up the theory of Transactional analysis for studying the game

like behaviour shown by organisations. However some aspects of the use of Transactional

Analysis in buyer-supplier settings may need validation, as Transactional Analysis was

primarily designed for therapeutic use. Since this research has presented a transference of

Transactional Analysis knowledge from therapeutic settings to buyer- supplier settings,

one of the primary concerns raised by Transactional Analysis practitioners would be the

validity of such an approach? The researcher at this point would like to comment that as

this conceptual approach gains some recognition, the procedures for validation, which

would gain credibility from Transactional Analysis practitioners and also give access to a

willing data set for further analysis would be possible. Also, the assumptions used for this

166


research when transferring knowledge of Transactional Analysis Game behaviour to buyer

supplier settings has been discussed in chapter four. Hence these assumptions when

completely validated will lead greater credibility to this research.

The research has tried to present a new insight into the study of supply chain relationships.

The premise for undertaking this study has been to look at the power issues and problems

in relationship building as highlighted by various researchers, from a perspective, which

looks at organisations as entities and the individual human being working in these

organisations. This brings out the psychological aspect of the relationship and hence this

research is appropriately titled "Exploring Transactions between Supply Chain Entities: A

Psychological study of buyer-supplier relationships" .

This research has presented a collection of game-like behavioural scenarios, which depict

the dynamics of the relationship and each scenario is presented with the procedures for

ending the game-like behaviour. The processes are suggestions and these have not been

actually validated. The only validation available is that the scenarios are modelled using

the different games modelled by Berne and other researchers using transactional analysis

for Human behaviour. The game-like behaviours modelled for organisational behaviour

using transactional analysis are done by bringing out the similarity between the dynamics

of the scenarios depicted in transactional analysis literature and actual scenarios available

from literature and respondents. These could be validated in the future if respondents agree

to study their relationships, highlight the game-like behaviours, and then use the processes

depicted in this research to try and change the dynamics. For this the researcher can help

by being an active participant by using the methods of action research.

To summarise,

1. The relationship is studied for repetitive patterns of behaviour, which bring out the

negative pay-off, this could be feeling bad, feeling frustrated and angry and a

certain antagonism for the other entity. In terms of situations where the

organisations do not have a script of game play, but receive information from the

other entity that such behaviour is being depicted, it would still be necessary for the

organisation to study the relationship to locate any individual scenarios. The

variables to consider and the actual process is described in chapter 5 and chapter 6.

167


2. The relationship matrix spells out the strategy the firm wants to employ for the

relationship with its counterpart in the supply chain. Once the strategy is known,

then the game- like behaviour associated with the change needs to be studied. Once

the game-like behaviour scenarios or issues are located, the process to control or

stop the game-like behaviour may be tried out. In many cases the identification of

the scenario is sufficient to control it and no other steps are needed.

3. The processes differ for organisational level behaviour and individual level

behaviour. For individual counselling, it is important to recruit people who have the

qualification for using Transactional analysis in organisational applications.

What has been achieved?

Phase I: The Literature review generated the research objectives for the first phase of

research:






Qualitative research using Phenomenological interviews focussing on critical incidents

relevant to the buyer- supplier transactions was conducted. The analysis generated a

research gap, or a set of themes to study further. The themes were represented as:


• Discretion, humans have in the relationship

Phase 11: In the second phase of this research, the tools relevant for studying these themes

were reviewed and a concept map was formulated, which incorporated a number of

concepts relevant to the research focus. The concept map was based around studying the

research questions identified in Phase 11:

168


Are transactions between individuals strongly influenced by the situational context


Where the manipulation of power in the organization is realized as games, is TA a



strength ofthe situation?

The research questions were further studied using the concept map, and subsequently

developing a methodology using the concept map and applying the methodology to a

number of case-studies depicted in chapter six.

7.2 Limitations of the research

There have been several limitations to this research:

1. Due to sensitive nature of the data, the data collected has not been vast and

comprehensive.

2. Validation has not been possible, and the researcher has had to resort to explaining

the research contribution by explaining the concepts through a few cases, which

were a part of the initial data collection exercise.

3. The research has had to resort to assuming the validity of a few concepts at face

value, as it was not in the realm of this research to try and prove the concepts used

in this research.

4. The researcher has provided a comprehensive research contribution in the form of a

methodology and has explained the use, but it has not been possible to convert the

research into a tangible tool, which the industry may be able to use immediately to

sort out the buyer-supplier relationships.

7.3 Could it have been done better - An After thought?

The research process has not been flawless, as the researcher struggled to get the right

methods to conduct the research. As discussed earlier in this chapter, it was decided that

the research had to be conducted using qualitative methods. The data collection methods

169


for the qualitative design had to be selected so that they could provide the necessary

insights into the relationship issues. The best method would have been Action research (

Miles and Huberman,1994; Robson, 2002; Denzin and Lincoln, 1994; Patton, 2002) ,

where the researcher would have been a part of the sample group and experience first hand

the proceedings during buyer- supplier meetings or transactions. This would have given

invaluable data in terms of actual behaviour shown by both parties, verbal data, written

data, and their feedback about the transaction after the event. Also, this would have been

an ongoing process, which would have given a more robust and reliable insight into buyer

- supplier relationship issues. Although, it looks like the researcher had nailed the most

appropriate methodology, it was one, which was not very practicable,

1. It was difficult for humans in the buyer-supplier relationships to function in front of

an outsider during such delicate moments,

2. The researcher could not find a suitable respondent firm to collect relevant data,

although the researcher did spend five months in one of the collaborating firms of

the supply chain project, but it was difficult getting any data from direct

involvement with the purchasing or sales teams. The researcher could however use

some written data, available in the form of memos and letters sent between the firm

and the buyer firms.

The above mentioned limitations made it easier to adopt the critical incidents technique for

this research, as this is a method for coming close to direct observation but avoiding some

of its hardships. The objective was to explore the dynamics of supply chain transactions

from human perspective, hence the role of critical incidents within the transaction process

and the reflection of the respondents on the incidents provided valuable insight into the

conduct of buyer-supplier relationships. Whether that process would have been better, still

cannot be said as the research area warrants secrecy in data collection. If the research was

to be conducted again, the researcher would have followed up the initial phase of data

collection, involving Literature review and qualitative interviews, with action research.

The willingness of a firm to allow the researcher to be present in the firm and conduct

research is still a major question? But if this was possible, valuable data in terms of non

verbal behaviour: expressions, body language; and verbal data could be collected for

analysis, which would strengthen the research and provide more validation for this

research. The non-verbal data and direct involvement in the transactions would have given

170


better validation for the use of Transactional Analysis for studying buyer- supplier

relationships.

7.4 New Knowledge generated

In section 7.1, the researcher has presented the research contribution and whether the

research objectives have been achieved. The research has been able to achieve the research

objectives to a large extent. Whether the research has generated any new knowledge for

increasing understanding of the research domain is also a separate issue? The researcher

thinks that this research has sought to provide new knowledge in the subject of buyer

supplier relationships from the perspective of humans in the relationship. Hence, for this

aim, the new knowledge generated has been:

I. The use of "Transactional Analysis" a tool used for therapeutic counselling, and for

studying human behaviour and relationships in studying buyer- supplier behaviour

and relationships. The knowledge generated has been more of studying the

feasibility of this transferability of concepts, but validation has not been possible.

The initial research has generated feasibility in applying "Transactional Analysis"

to study buyer- supplier transactions and also to model the dynamics of the

transactions, which helps in better understanding of human behaviour In the

relationship and also the dynamics ofthe transactions itself.

2. The most important contribution of this research is the Alignment methodology that

has been proposed for the study of buyer- supplier relationships. The research has

generated various highlighting contributions to knowledge in different stages of the

research. The first bit of knowledge created has been through the formulation of the

concept map, which brings together various concepts in a cohesive format that

provides a valuable insight into the dynamics of buyer- supplier transactions and

the various factors thus affecting the relationship. The cor-relational analysis of the

concept map was not in the realm of this research, but the concept map itself would

provide a valuable starting point for anyone to undertake this task.

171


3. Another bit of knowledge creation has been the relationship matrix, which presents

a strategic look at buyer- supplier relationships by using levels of satisfaction as a

measure for a behaviour depicted by buyers and suppliers in their relationships. The

two frameworks and the use of Transactional analysis has led to development of the

methodology that can be used for supply chain alignment by focussing on studying

buyer- supplier relationships. This alignment methodology complements the DNA

framework (fig. 5. 5) as it presents the alignment methodology for the relationship

strand ofthe DNA structure.

7.S Conclusions and future work

The research has been successful in bringing to light a new criterion for studying buyer

supplier relationships and identifying problems between them. The research also has been

successful in introducing a concept from psychology, viz. Transactional analysis in a

setting, which has previously looked at improving buyer supplier relationships using

technology and economics.

Although, as discussed previously the research has primarily relied on published research

in the domain of psychological transactions and some interview data, the introduction of

interesting concepts viz. Transactional analysis, situational strength, exit-voice has made

the research innovative. The absence of case-study data for validation has been a major

limitation of the research, which has been overcome to some extent by using critical

incidents. The researcher feels that as this type of research gets recognition respondents

will be more at ease to permit the use of their relationships and premises for case-study

analysis and action research. Until then, the research will provide more food for thought to

the academic community.

The future work for this research area can be summarised as follows:

1. validating the processes depicted in chapter five. This will help to actually see the

research used in an actual industrial setting.

2. creating a wider library of game- like behaviours through surveys and interviews.

These game- like behaviours can then be matched with respective quadrant

movements as depicted in the relationship matrix.

172

------- ------- ----


3. using the infonnation as a variable for knowledge management in order to create

better supply chain systems which incorporate this infonnation to reduce supply

chain issues.

4. need to test the dynamics of the variables in the concept map quantitatively.

5. need to modify data to suit infonnation modelling capability. Significant insight

and benefit can be developed by modelling supply chain interactions using TA and

have been impressed by the diagnostic capabilities of TA and its capability as an

infonnation modelling tool. As supply chains become increasingly lean and agile,

their overall perfonnance becomes increasingly dependent on maintaining mutual

beneficial power relationships. TA provides a means for this understanding and

hence relationship management.

7.6 Summary

The researcher has presented his research in this thesis in a fonnat, which lends to more

discussion than results. The research has not depended on vast amounts of data to prove an

idea, but has relied more on intuition and meanings derived from what respondents have

described about their experiences. The data for analysis has been sought from published

literature and a few interviews with respondents in buyer-supplier relationships. The

strength of this research has been the depiction of a new conceptual approach to

understanding buyer-supplier relationships and the dynamics occurring in these

relationships. The conceptual approach at this moment does not give a definitive answer to

buyer-supplier relationship issues, but does present some intuitive suggestions that buyers

and suppliers can consider when evaluating their relationships and certain relationship

issues or when deciding strategies for conducting the relationships.

The researcher has concluded the discussion with some insights into the research

contribution of this research. Also, presented are a few suggestions for further work in this

research area and some limitations of this research, which is beneficial to anyone willing to

conduct further research in this field.

173

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184

Appendix 1

Appendix 1: Document Summary Sheet

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Appendix 3

Appendix 3

"Application of Transactional Analysis in Supply Chain Networks: A Potential Holonic Mediating Tool" , Proceedings of the Institution of Mechanical Engineers, Part B: Journal of Engineering Manufacture, 218(85) , May 2004, pp 571-580

196

Appendix 3

17I

Application of transactional analysis in supply chain networks: a potential holonic mediating tool

S l)',lIli. C J BackhtHN.' and ~ I> Burns· Wolfson School of Mechanical ami Manufacturing Engineering. Loughborough Unin:rsity. leicestershire. UK

Abstract: The aim of the research detailed in this paper is to model and uhinmlcly lO improve the relationships that occur between individuals transacting across organi711tioll houndaries in supply chain nCl\.\'orks and/or virtual partnerships. Opportuni'>tic behaviour and/or repetitive pattcms of behavioural actions, resulting in gamcsmanship, are ex.plored to determine Whether, under certain situntions. the behaviours Icat.! to win-lose situations and reduced !rust. Trans:l.ctional arwlysis (TA) is used to model games, which have beell identified and observed in collaborating industrial partners. The ex.periments carried out to date have led to the fonnathm of a preliminnry relationship model which call he used, firstly. to identify correlations to the established libmry of TA games and hence, sCCtmdly. to investigate methods of mitigating the etTect of some of the more negative fonn of games. It is proposed that this technique can he used as a mediating tool within holonic mnnufacluring systems or. at the ultimate, result in the establishment of relationship holOl15 that could establish and maintain standardized co-operative patterns of bcha ... ·iour between intemcting partners, or holons, in the !OiUpPly chain.

K~.n\ords,: transactional analysis. supply chain networks. organization boundaries. virtual partnerships. mL-diating tool, holonic manufacturing systems

IXI"ROnUCTI()i'i

Within any supply chain network. individual interactions often suffer from the problem of' local optimi7..ation· at the expense of overnll system optimization. Within hotonic manufacturing system.;; where supportive collaborJ.tion between interacting holons is a fWldamental requirement. such 'local optimization' isclcurlycounterpnxlucti .... e. The rcscarch presented in this paper focuses on intemctions at the individual1cvcl in order to determine the nature of the rc1ation~hips between colla\)()mting individu'lls who co-opernte across comp.·my boundaries within networks of companies. It was hypothesized that the quality of the relationships between these indi ... 'iduals has a fundamental effect upon busiress success. TIlis is based on the recognilion that in tl¥:se relationships there is a great potential for psychological behaviour to occur that can result in one business partner winning in a sensitive problem situation while another loses. The initial work concentrated on assessing whether this fonn of win-lose behaviour dC\:s

]M MS wa., 't'II:t'i1iNl Olf /9 JIlW :rJOJ md wa., 1'rt't'J'lt-d aju., rt~isi"" IQ' pultiKotiQlt Off 18 Fm1'll4T,Y ;rJ(U. ·C<7Tcy.:mJJzw, (ZUlhor; WOrJQII SdJocI of Alt'tirordca/ tmd ManuIM' tlU'''', ~itrl"in:. Lcupt-aJgh Uni~'trsil)'. Lmghwnx«1r. Leicrsurshirt LEII JTU. UK.

197

occur, Wlder what particular circumstances. what influences it and whether the aAlroach bnscd on If'ansactional analysis (T ,\) can be used a,<; an efTective tool for modelling aoo explaining the beha .... iour. The aim is to raise understanding of relationShip issues in order. firstly. to aid management in managing relntionships to achieve mutual benefIt and. secondly, to ~"1Iggcst a route to the cstabl!shmcnt of relationship holons whose function would he tQ cstablish and monitor bcha\'iouml pattents for business relationships [I. 2).

2 RK'lEARCIl COl'TEXT

All businesses h:we complex internal networls of relationships between individuals and groups and at different levels in the organil..ation. They also have partnerships and relationships that extend beyond the boundaries of the company Wilh regulatory agencies, emplo},mcot agencies, customers, suppliers and partners. With many of the regulatory agencies the business has relatively Iitllc power and it has to abide by the rules that arc defined. Howe .... er. with other collaborators and sometimes with customers dlC business exercises power by defining the rules of partnership in its favour

Appendix 3

m S DANI. C J BACK HOUSE ANt> N 0 BURNS

and sometimes by controDing the purchnsing behaviour or customers by. lor example. a "lock-in' strategy. The ultimate aim of the busine;s is always 10 maximize power \\ooithin the supply network.

2.1 l-o"1'r in tbe supply nct\lork

The lor.;sue of power in supply networks has been explored by Cox (3]. Cox et al. f~l. hblin el al. (5]. Conrnd [6] and PfctTcr (71. among many others. Dahrs (8J definition of power is the capacity of actor A to gel actor B to do something that :u:tor B would probably not do-if not influenced to do so. According to Cox, the buyer is dominant when the utility and scaldty of the bu)'cr's resources relevant to the supplier arc high. When this situation is n. .... 'ct'Sl-d and the utility and srorcity of the supplier's resources relevant to the buyer arc low. then the supplier t~tkcs a dominunt role. In Co:'('s view. wielding power is not a negalh'l! process but an c.'>Scntial ek-ment of strategy and planning. All rimls altcmpt to frame their relationships with outside bodies to their own advuntage. This advantage is designed to maximize their own revenue and to keep competitors out. According to Tccce [9}, who describes the resource based view of bu.~illess, power cun be cstablishl-d if the business has some advantage that is difficult for others to imitate but is much in necd. This couki be access to a k-ey rcsource or a competencc in some technulogy [J O}. Having and wielding power do not neccss.uily have negath'c connot..'ltions for others in the relationship. It is really about how thc business uses il'i powcr. AD COIllpanies exist in a variC'ty of relationships some where they do hove dominant power and many where they do not.

TIle issue of power is usually accepted as a natuml element of collaboration and Illany companies accept reasonable rules and conditions applied by their morc larger and powerful collaborator. Ilowever. the situation becomes difficult ifpowcr is applied in an inappropriate manner. In such circumstances, less dominant partners stand (0 lose a considcmbJc amount if they cannot influence the situation. An example for the potential inappropriate application of power would be wru.!'Tc a consignment of goods has been reC'\..-l\.'Cd but is now no longer required by the receiving company. If the receiving company is dominant in this relationship then it may be tempted to maumu.e its own position by lm.nsferring responsibility for o\'er~supply to the supplier. Alternatively. it could blame the supplier for a quality or delivery fault. Thus. while f'O,-,'Cr has value in th::H it enables a business to oplimizc strategically its relationship in favour of its preferred strutcgy. it can also be used inappropriately in a manner that causes damage to a relationship. It is obvious to any outside obsen'Cr that the inappropriate application of po\\t!r in ~'1.Ich

circumstances would result m long-tcrm disadvantage to both parties. Howe\'Cr. 10 the individuals conccmcd

Proe. Ins'" Mccb. ~n Vol.21& Pan B: I. (I~I MmafKl:mc

198

in the transactions, the distracted long.-term vicw may be difficult to maintain. Shorter-term considerations can become dominant, in which case inappropriate gamesmanship occurs based primarily on the balance of power in the supply network.

2.2 Opportunistic belun'iour

In contrast to power relationships there also exists opportunistic behaviour within supply networks. This typical1y involvcs onc partner having acccs.<; to knowledge that the other panner does not h.·we and then taking advantage of the knowledge asymmetry to gain a busin~s advantage. Jap Ill] has explored opportunistic behaviour. Her determinant .. of this behu'\-'iour are suspidon of opportunL<;tic behaviour. asymmetrical knowledge (onc party knowing more than the other) and poor distributive justice in the past. A variety of behaviQurs can occur between partners involving opportunistic jostling in order to change the power balance in thc supply network or to achieve a one-off advantage. Similar to the inappropriate application of power discussed in the previous section. an injudicioll<; approach to opportunistic jostling is likely to risk the demise of me Iong~term relationship [l2}.

Jap explored the mcchanisms of governance that control opportunistic behaviour. According to Jap, the factors that tend to Hmit opportunistic behaviour betwl"eO parties are trust. bilateral investments and shared goals. If the parties invoh'cd baYC estnbJishcd 11 trust fC'lationship over a prolonged period of lime. then this tends to limit opportun~tic behaviour and to encournge more open communication, If they have bilatcml and shared invest~ mcnts in the collaboration with shared goals, thf.'Il this also limits opportunistic behaviour.

2.3 E'\:it or \Oil'C relatimt!>hip

Whctherdominant or Ics.. .. powerful, aD parties in a supply nctworL: may be suspicious of both the inappropriate use of power and opportwlistic behaviour. If either occurs and is idcntifil-d. thl')' are unlikely to accept this situation willingly. How they choose to respond depends upon a number of factors. It depends upon the nature of the relationship. If. as Hir:sclunan [13) and Hdp!r [141 say. the relationship is exit in type. Le. the two companies in the relationship arc not fundamentaDy dependent upon each other, then typically they \\'ill end the relationship-probably relatively quickly aoo easily. However. if there is a '\-'oice relationship, i.c. the companies are mtcrdepL'Ildent, then there is a strong incentive of sclr-intcrc~1 to Slay in the relationship and to attempt to resolve any problem issucs, The exit relationship leads to rapid termination of the relationship but the voice relationship is likely to lead 10 inleraction. the pattern of which will depend upon the- char.lCteristics of the relationship.

BI08O) () IMcdaE lOOA

Appendix 3

APPU('ATION OF TR.-\.."IlSACTlONAl ANALYSIS IN SUPPLY CHAIN NETWORKS S7J

2.4 n4.'b~niours in rdatioo<ohip .. and situational strengths

A network: of intLT.lctions imoh'es many relationships, some trnnsitory and some more pcnnanent. both inside the company and cxtcrnnllo it. MUD}' regul:u transactions take place at a factual and non-psychologil.'al level in",oh-jng simple day·to-day transactions. However. others occur at a deeper level during negotiation or if there is an issue to be resolved. In .such situations there is a strong potential for inappropriate use of power or opportunistic behaviour to emerge depending on how both parties in the relationship choose to behave. (In this sense, behaviour is defined as a sequence of actions thut an individual within a company carries oul in response to a situational stimulus.) 111e personal disposi· tion of the indh·;dual and the constraints of the work situation combine to become fundamental to determining the behaviour in the relationship. The person will exhibit preferred personal ways ofbchaving which may be more evident in stressful situations involving problems or delicatc negotiations. It is this factor that is fundamental in creating gamesmanship situations which, while ap(X'ar~ ingsensibletQ the individuul conccmt.-d. nrcdetrimcntal to long·tcmt busincss.-to-busitlt."SS relationships.

In addjtion. no matter what the individual predispositions arc to behave in certain wayS. the cnvironmt.'1lt in which a person works will effect their response to a greater or lesser extCnl. The work situation is very differ· cnt from. for example, the family relutionship. At work. people arc "-'ithin a hierarchy of power relationships. people progress in the organization by meeting apprnisal targets. the organi7.a.tion they work for is elficieney oricnlOO and the indh'iduals work 10 targets. They lack fundamental freedoms to determine their 0\'11 actions.

To explain this restriction to frct."<iom of action it)r the individual the concept of situational strength has value [15, 16). In the strong situation the decision Intitude available to the indi,,;duaI is small and behaviour is largely prescribed by organization policy or some rule set. This situation can be conceptualized as red traffic light .. where everybody (most at least) kno""" the rules of the lights and obeys them-with sanctions if they do not (if they are caught). The ambiguity in decisions to be made is low and the rule set dcJining behaviour is high. Under these circumstances. people, no matter what their predisposition, tend to behave in 3. similar manner under the same stimulus. The opposite to the strong situation is the weak situation when there is high degree of btitude in decision making and the <lctual decisions that emerge depend more upon indivi· duals' preferred w'ays of behaving.

However. it would be ""'rong to assume that the indh'idual has no influence on the situation strength. There is a mutual interaction between situation strength and the indi\iduaJ disposition to behave in certain wa~. Onc strategy for a manngcr may he to try to engineer the sitwtion so that they personally ha\'e considerable

BIOS03 G tMo:bE ~

199

freedom in their decision making while they ensure that the situation is strong for their own subordinatC5.

A further issue is that of discretion which has been explored by Hnmbrick and Finkclstcin [17], The perception of the strength of a situation is related to tbe personality orthe indh'iduals and it i.~ likely that certain people who prefer stronger situations ,\ill dcliberatcly select positions whl."re thediscrction in decision making is l'lrgcly controDed by company policies. In contrast, others may prefer weaker situations and tb!y either engineer or choose the situation to suit their personality. Hambrick and Finkelstcin identified that strong situations often oorrclatc with older chief excretive offin.'TS promoted rrom within. Iow executive rt.'Illunemtion, little use of incentive schctt1C!>. stable strategy and large finns. The person will follow prescribed bcha\'iours when the situa· tion dictates and these behaviours will have been learnt ovcr a significant time period. They win Im'oIyc an align· ment of individual behaviours and the organization's proeedur.tli7.ed nnd preferred ways ofbchaving.

In the research described in this paper the commonly held view was accepted that, in a weak situation, individuals involved in transactions adopt pattl.'fns based upon their own predispositions, muximizing their own power, access 10 information or political influence and that. in a strong situation, the organilation or group provide strong guidelines and will sanction people if they depnrt from the guidelines. In the strong situation the organization ensures that a ct.>rtnin bcha\;our results when a stimulus occurs. The organization may do this because it needs oontroJlcd nnd predictable responses ror safelY reasons. to minimi~ damage resulting from an ulh .. ,-sc situatiun. or 10 guarantee partil.:uiar performance levels.

In both strong and weak situntions the intemctioll between an individual's predisposition for behaviour and the prescribed behaviours preferred by the organization is complex. People with certain trait patterns will seek to maximi7.c their own situation regardless of the strength of the overall siwation; others will prefer 10

work in environments having particular situation strengths and they will seek employment in companies offering these i.'Onditions. A model of these interactions between individuals in collabor.tting organizations is shown in Fig. I. The figure depicts the process of two organizations trnru.llcting. in a !,upply network relationship. The relative power between the two organizations and the effect of situation strength will influence the choice of game played and whctht. ... pt.'Tsons representing the organizations play their own game or play the organization'S game.

2.5 (;UfflCS

The behaviour between individuals in the organization. or when they are acting as proxy for the organization.

P'roc. 1115111 Mech. l!DP Vul2lJ Pari 8: J. En;:ilIeeriaa Manaliu;llIR

Appendix 3

S DANI. C J BACK HOUSE AND N D BURNS

b."Ss pm .. crful memt>er

Int]!!m~:iDlllklQ!l S_ J1Il..I!l!!!!<: Selling

rolc!of defensive p:umership G() ... em:mc~ mcdumi:uns

stratesi~ SitU31ion strength ExiriVoice ~Iett}

~ Pow~ Power

mn~ bo: q Game-like ~ used 10

used 10 behnviQ\lT gain gl1in <!dvnnUlse advantage

~ Ri$k (If

Game - tt:sult Riuof

oppol1uni5lic opportunistic beh:wiour

A Iteration o( bchD.\·jOUT

rower and trust

.......... ../ '-..... ~ rig. I Two organizations in a supply network relationship

im'olves lrnnsactions of primarily verbal and electronic communication. However. behind this communication there is a significant clement of psychological meS!iagc. c.g. when the communication becomes abusive and loaded with feeling. According to Jablin et al. 15~ language games are used by organizational actors to disguise their political intentions, to mobilize support and 10 provide opposition. Various games were identified by llurawoy 118J. such as <making out' games tocompensate for loss of control over the labour pro<x:ss. Such behaviour may appear to the detached observer as not being predetermined nor having objectives but it is rational to the actors with respect 10 the decisions that they make. For example, an individual may enter an organization with every intention of being productive but may be pressurized to behave in certain ways and to limit their work output. They may have to choose between a strategy of being productive and to risk group sanction or to join in the group game. TIlcse organizational games exist within all comlJanies, between individuals and between groups. They also occur between collabomling organizations. Inherently. the complex issue of power is involved-power that may shift and 1110\1: as the game is played so that an individual tll.'lt started as the dominnnt pnrtncT mny nOf be the dominant partner at the end of the game.

In the organu.ation. a person exists in a comple:-:: network of games; sometimes they are the .. ictim of the

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game and sometimes they stmlegicalty manipulate the game to their own advantage. I n many respects. how they progress within the organization and gain power depends upon their skill 10 manipUlate strategically the games to their own advantagc. Games can exist as surface phenomena. such as political games defining the frame ofrcferencc for the indi .. idual in the organi1.ation, e.g. networking to achievc empire building (19]. 11lc games can be intra~organj7.ational, between groups or between indi .. iduals and the dominant coalition, e.g. 'them-and-us' games, or the games can be deeply embedded inside the organi1.ation representing the social reality of the organization and not always within the conscious IrmowletJgc of the participants. They are designed to maintain power balances. J\ further discussion of these leveL .. of games has hccn provided by Frost 12{)~

2.6 Tr.msactiollal anal~.<Js

The beliefin this research ~llS that the techn.iques ofT A could be used to model the interactions between communicating indi .. iduaJs. TJ\ as originaUy developed by Bcrnf': (21, 22) npplied to weak situntion .. involving script messages coming from the parent. adul, or child states of the individual. The parent applies injunctions and judgements. The adult is factual with absence of

BI08O) !;IlMcdlE 20()..1

Appendix 3

APPUCATION OF TRA."IlSACfIONAL ANAL YSlS IN SUPPLY CHAIN NETWORKS

fceling. The child is emotional and feeling. According to Berne. people can speak from a number of identifiable script positions related to where they pcrcc:£\'c themselves to be in the parent. adult or child spectrum. In weak situations it is indi\'idual prefen.'11Ccs about behaviour (and how othc~ see them) ilial hu\'c the most significance and determine the response patterns.

In the strong situation, Berne recognil.t..'il that the organization p.1thology will be dominant. The niqul'lti'. i.e. organization procedures and rules. define lhe stages and \lerbal paUerns of any transaction. The etiquette is the parent or trnditional aspect of group culture: it enforces the social contract nnd provides form to lhe group process. Berne tht:re[ore extended TA theory to the organi2!l.tion and in t~ process defined the ('Iiquetle (corresponding to the parent), the technical culture (corresponding to the :lduh) and the dlaraeter (com· spending to the child). The technical culture is the rational aspect uIXI consi<;l\ of whatevcr scientific/ h.-chnical knowloogc and skill is required to carry out the group activity. Charnctcr. the emotional part of the cultuTe, consists of those behaviours permitted by the etiquette.

Fischer (23] described the job of the organizational etiquette to be that of selting policies and behavioumJ rules. It takes infomlation from its external environment and internal systems and tnmsforms it imo policies and behavioum1 rules for tJu.' technical (..-ulture and character. This theory was also put forth by Blakcncy (24J who pro-posed that organi7 .. 1tions are open and social systems. They interact ..... ith lhe external em;ronmcnt, they take in energy inputs (stimuli, in TA terms) and use internal processes and structures (ego states) to transform them and 10 make energy outputs (responses). He also pro-poses that every system consists of subsystems each huving ego ~1atcs.

Most communications betwccn buyers and sellers in networks will involve some directives from the comp.my about how lO behave. combined with rcsponse patterns dctennined and controlled by the transacting indivi· duals. The organizational script and the individual script will interact depending upon respective powers and dispositions. No individual is going to accept completely the company injunction about beh.l\;OUr, and in most ca.sc..<; the company would not wnnt this. How¥ ever, in some situations. and particularly in those of high risk. then the behaviour patterns in response to siluational stimuli are strk11y controllcc.J by the organim· tion and frequently rehearsed to ensure that they are correctly carried out. In these situations. ambiguity is removed as far as possible.

TA is a powerful tool for displaying and analysing tmnsaction patterns. As its origins arose from the tht.'r.lpc:utic counseUing of couples. it has been shown 10 be highly etTective in conflict resolution. At issue is how much modiflcation of the TA theory is needed to

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make it applicable and useful within the organizational context.

2.7 OrgallujJtiull ~aml'S

There are many ways in which the individual interacts with his/her work organization and bolh attempt to manipulate each other to obtain what each desires. Early examination of these relationships h3s confinned that opportunistic behaviour does take place particu~ larly in situations where onc party net..""s to win: this causes some fonn of game to take place. Rather than looking at these games from a mathematical sense as in game theory, the majoT interest is ~ith the psycho-. logical transactions and whether the technique of TA can be used as a reasonable modelling tool to represent the pattern of transactions. In TA tenus u game has a deflnite sequence of activity typically in\·oh'ing a pattern of tTansactions. a switch. for example, where the victim becomes the pt.'f5CCutor and u negative pay~olf for one of the parties. In this sense a game truly not involve all stages but may involve 11 regular pattern of intcr¥ actions, some corresponding to the Berne games, some being collusive in nature and some simply being a regular repeating pattern of transactions that this person or organization frequcotly ex.hibits under the same stimulus.

2.8 The games

Games laking place in the organization as a consequence ofeithcr individual or org'lui7l1tional characteristics may gain shorHerm benefit for the more powerful paTtnt.'T but in the long tcnn may lead to loss of trust nnd higher risk of Tclationship failure. Since honest colla· boralion is moTe desirable in maximizing long-term mutual perfonnance, then the game-like beha\;oUT has to be recognized and attempts made 10 change the unhelpful aspects of this bcha ... iour. Returning to the concept of holons at t.bis stage may pro\'c useful. A fundamental aspect of a holonic system is that all the holons mu.'it operate in a co-operative cm'ironment in ordcr to achieve whole system optimization. Unfortunalely, for the theorists. this takes no account of the illdivlduality of human nature. lndhiduals within holons. trnnsacting across holonic boundaries. may develop personal games strategies which do not support, and may indeed damage. whole system optimization. Thus, at onc level. managers need to be able to predict and identify non-beneficial games in order 10 'defuse' them: at a second level the concept may lead 10 the potential development of a relationship holon which establishes and monitors mutually beneficial behavioural standards, or codes of conduct during negotiations or problem resolution. Such systems can IlCver remove the human clement in the relationship but Ilt least they

Appendix 3

5i6 S DANI. C J BACKHOUSE A.'-JD N D BUR.."'iS

could define 3 standard approach in the business 10

conduct relationship behaviours.

3 CASf: STUllI f:S

There arc a number of questions that nrise from the research that attempts arc made to answer:

I. Arc transactions between individuals strongly inHucnecd hy the situational context :md the power rekltions in the organinuions?

2. Where the manipulation ofpO\,,,cr in the organization is realized as g:lmes, is TA a valid rcrrcsl..'tltation of these games?

3. Irlhe games arisc from the individual or the organization. is this contingent upon the strength of the situation?

To gather data to answ(..'f these questions a qualitative study was carried OUI involving both semi!>1ructured and structured interviews with people involved in network relationships. 1nl.' initial purpose was to determine whethl.'T the model proposed and sho\W. in Fig. I wa~ a reasonably accurate representation of transactions. If \'crified. it "'as then intended to identify whether specific company policic.<; and comlnunicution puttcrns lead to repetitive patterns of behaviour among supply chain entities. finaUy it was intended to provide managers \\;t11 the re~ulting insight into games being plaYl-d in order that they could better understand and thus manage Ihe situation. Studies have taken place in organizations invoh-ed in:

(a) electronic fCverse auctions between buyers and suppliers,

(b) supply chain interactions bct\.\'CCn food product supplicr.5 and buyers and

(c) supply chain interJctions between automotive suppliers and buyers.

:u Cll~ !ilody I: dl'Ctmnic 1mctions

Th: electronic l.lUCtiOO is an im)'Xlrtant new means of trading that has been made possible by the intcrrrt. It resembles a reverse bidding process where potcntial supplicrs of goods or services compete with one anotil:r to offer the lowest price. A deadline on the bidding is imposed on suppliers all of whom can sec each other·s bids on the internet In many respects. electronic auctions change the rules of engagement in supplier to buyer relationships. The nu:tion process apparently gives grcntcr power to the purcha.'iCr. particularly enabling them to force do,,"n prices. However. in reality. suppliers develop new rules of engagement in orocr to find ways of exerting and dC'o'eloping their own power.

Discussions wcn: held with n numberofbu),ers who do business by ~ns of rl"VCT~ auctions and they were

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asked to describe qualitati\'ely how suppliers and purchasers behave during the auction. Most of the auctions were conducted in a reasonable manner although they did not arn.·a~·s realizc the savings planned and they seemed to do liUIe for lont,>er-tcrm trading p:.ulnerships. HowC\'Cr. it does appear that supplil..-rs do attempt to maximize their power in the relationship with the purchaser in order to maximi1..e their 0,,"11 advantage. The situational strength in a reverse auction would appear to be strong in 111..1.1 the rules of engagement nre defined and controlled by the purchaser and thl'fe is not much opportunity for supplicr discretion other than deciding whether or not to bid and Wru.ll price to hid.

In discussions with a majorprodu(.'Cr QfmOIOr vehicles the foUowing procedure was idcntified at the company:

L The invitation to bkl was issued nod a pre-qualification process took place.

2. Only those capnble of satisfying the quality and delivcry requirements wcre invited to bid agllin!.1 a specification issued by the buyer.

3. Theauctioll was limited in tennsoftim~ generally the bidding was slow in the first half· hour but then speeded up as the time passed and the particip..'lnIS of the auction gained knowledge of the bid levels from the other participants.

4. As the deadline approached. Ihe bidding accelerated. culminating in a frantic final 5 min as suppliers decide whether they arc willing to reduce their price tinally to win the contract.

The strategies adopted by the suppliers can be surprising and at first sight counter-intuitive. They arc aimed at increasing their own power in relation to the other suppliers and/or the purcl1asc:r.

A variety of games ha .. ·c bct.'11 observed:

I. Co/Johoralwn. Supplicrs fonn tl group th:.l.t bids as one unit and then, when the work. is awarded. they divide it up between themselves. By being a more unified entity the b..'lrgaining power of the suppliers is increased.

2. CaUusion. The buyer implies 10 a fllvourcd supplier that an aggressive approach to price rcdu(.1ion which forces other suppliers to reduce their bids could win future favour.

3. UI!t.' leader. The supplil-r bids \'l'1)' low in the knowledge that... if it wins the order, the purchaser will be locked in and it will have to purchnse spares and maintenance from the supplier. The ~'Upplier is making a strategic judgement about the vatue of the work based upon power acquired \\hen the buyer's s"";tching costs are high.

4. Joslliltg for adl·(Ullage. An incumbent long-term supplier may be under pressure to bid in an auction to retain its position as ~upplicr. This is clearly a mechWlism for the purchaser to exert power on the supplier. The supplier makes a ('akulat~ decision

810803 C IMedsE ZOOl

Appendix 3

APPUCATIOS OF TRANSACTIONAL ANALYSIS IN SUPPLY CI-IAI~ NETWORKS

fi~. 2 TA for the cle .. "tfOnk· ... 1uctlon )()s'51I.'11deT

about the buyers (:01\,1 of s\I,.itching and sometimes hacks out of the auction just before it takes place. This can place significant pressure 01\ the buyer since they may not. in reality> w1.<>h to switch supplier. Both parties participate in a complex jostling activity to gain advantage.

A lYl)ical case that \,\'01S modelled using TJ\ for the loss lender is s:llQ\n\ in Fig:. 2. In lhis case the now of information look place as (0))0\.\'8:

1. The buyer opens the game by providing the opportunity for the supplier lQ bid for the work. Genera])y this was carried Qut as an adull-to-adull tmnsaction. although in some instances. \\'hen the buyer exerted power. it was more parent to child. This is ShO\l.11 as transaction I in Fig. 2.

2. TIle buyer, Io'tilich in this case had more power. ~pccificd the It.'11ns and conditions of the auction to gain maximum advantage. In that the buyer is setting the rulcs~ this is shown as the parenHo-child transaction 2.

J. The supplier bids low primarily to' win the order but with an ulterior motive Gf gaining control at a later stage ~ilcn the buyer is locked into the supplier. ,\t the social level the supplier responds from the less dominant position of child to part.'llt. $hOV.'11 as tram;action 3. However, there is an unspoken !>1rategy in the supplier to gain $Ome power at ~t future date.

4. If the g.'une is played over a time period.. then eventually the supplier win have some dGminance due to the lock-in situation. If the supplit.'1"s !>1:rategy works, then it will at some future time gain J)Qwer. enabling it to continue social communication as the adulHo~ adult transaction 4 while the ulterior unspoken mCS$.1ge is parent-to<hild trans..'lction 5.

TI1t."SC behuvioural strategies arc an utLempt by the supplier and the buyer to maximize their benefit. However, it carries a risk for the ~\Jpplier of miscalculation that could Jead lQ a future loss of business and for the buyer the risk of increasing costs. Some form of strategic

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gamesmanship is ine"'itable in these sltuations and a code of conduct is needed to' define what is an acceptable game and ",,'hat is not. Such a rode of conduct coukJ be wriuen into the 'rules' of the auction or indeed in holonic terms. In the case of the latter a standard relationship holon for the auction environment would be: deJint.'d which would $Ct the minimum slant1ard for behaviour pattents and outcomes. The purpose of the holon w1)uld be to limit opportunistic behaviour and to build up trust. To be successful its bt.'11cJits to aJl parties would have to be clearly n.·cogni7..ablc.

3.2 Case study 2: s("Ur('hing for a (Iuulit) problem

This scenario was described by the buyer in the transacLion. One company supplied row ingredients to a manufacturer of food products. To ensure that the buyt.'f roccivcd a consi~tent and regular supply or the material a call·otT arrangement had hef..'1l negotiated. The suppJit.'1' produces and sends un ingredient to the buyer working to an ngreed fOfCC<b1 of rt.'quirement plus or minus an amount depending upon the agreed tolerance,

Most of the transactions between buyer and ~'Upplicr were factual and in TA terms adult to adult within a well-defined etiquette. Gamc~ljkc behaviour to gain advantage was only e"'Kienl in those relatively ran:: problem situations that arose between the buyer and the supplier. Onc particular problem that did ()(.);;ur was a case where the buyer received more product from the supplier than was actually needed in the period even thQugh the alnount ~"UppJied was still within the pre~agreed can~otftoleral11X. In tenns ofsituation strength the buying company opclated perfectly within the defined terms Qf contract and therefore at Hest sight seemed to dcmOl1)1ratc a strong situationa) strength. However, individual bu)'Cl'5 did have some latitude to interpret the framework. leading to some ambiguity in decision making and thus in reality operating to a weak situationaJ strength.

Because of the contractual agreement they could reject any consigmnent supplied if they found a quality problem. The buyer used this clause to increase its power by searching very hard to find a quality problem of any sort to enable tl~m to reject the conslgnment. Nearly every time they did find some quality issue on which to base a decislon to reject the goods.. TIle supplier did not readily accept tl~ situation but. since tl~ buyer was more powerful in the supply chain, they gt.'11er.J.lly aCC(.'Pted the consignment hack, In this situ;nion the etiquette no longer applies and the transaction switches to a p3rcnt~to-cllild situation \\-;th the supplier pluying a calculated g.'lme.

Although the trnnsactions have to be estimated it is posslblc to plot out the interaction. between ~\Jpplier

and buyer (from the buyer's per::.vectivc) using the TA tenninology:

Appendix 3

'" S DANI, C J BA(.XHOUSE AND N D BURNS

...... <~ ...• ,,--~ 7

Supplier

"'il:. J Salrt:hing for a qU31ity problem

I. The initial transaction is as follows: a caU-offinstruclion indicating the quantity rt.'quired as per prc-. arranged fim.'cllst was sent hy the buyer 10 the supplier. This is modelled as the adult-to-ndult transaction I in Fig. 3.

2. The: supplier responded by ~lIpphing the callt.-d-off quantity of goods. lois is ugain modelled as an adulHo-adult respon.<;c 10 the buyer a. .. transaction 2.

3. The buyer had miscalculated the amount needed and there was a considerable over-supply. There was a signilicant number or transactions that took place inside the buyer orgnni1.ation between purchasing and senior management about what to do about the over-supply. Thls is shown as transactions 3 and 4. In tmnsaction 3 there was an adull-to-parcnt mcssage from the purchasing department to the dominant coalition in the business. The dominant conlition took' a critic:.tl parental stance instigating the parentto-child tmnsaction 4 to the purchasing department. 111c message from the dOmlnant co..'llition was to find a means of rejecting the delivery. A sc.'lrch for a mechanism to reject the delh'cry was instigated and a oonVt..'uient reason found.

4. A message was then sent to the supplier. indicating with reasons why the batch was being rejected. On the surface this was an udulr-to-adult tr..l.nsaction, shown as transaction 5, but at the psychological level this was a powerful parental injunction and the underl);ng me53age that this was the supplit. ... fault and problem. shown as transaction 6.

5. The supplier. in a less powerfuJ position. indicated that they would take back the consignment. Although they dtd not think it wusjustifiable, they took it back primarily to maintain the reL'ltionship. Thi .. is shown as lrnnsaction 1 while the underlying ulterior message is 8.

In this situation the buyer had the powcr and the supplicrdid not want to damage the businessrc1ationship. The problem ""'ith the behaviour wns that it low(:fl"d Iongteml t rust and encouraged both parties to cont inuc to seck

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opportunistic bcha\;our in the future. Theframcwork nnd cuJture a II he buyer company were encouraging the buyers in the purchasing department to adopt !>trulCgies to gnin :mort-Icon advantage at the expense of longer-tcnn benefil.

3.3 CU!Iol' ... tudy 3: ) ou may be pmudul. but ...

While negotiating. for the business, the supplier agreed 10

most of the terms and conditions set by the buyer and entered into a longwtcrm partnership at agrt.'Cti and negotiated prices. Some IUne aftcr the busincss rdatiolll:lhip had heen established. a lock-in situation had developed which 11.:udcd 10 give the supplier more power. TIle supplier used objective reasoning backed by tools such a .. activity-~ed costiug to jus1ify a pricing incrc<l!'e. In this situation the buyer agreed when presented wilh the facts.

The transactiolls took place over a signiiicant time intcr\'.tI. The approximate sequcnce oftransaclion ... WilS as follo ..... s:

L Initially (Xlwcr seemed 10 reside with the buyer and the supplier agreed to all the rcquirCll1enls of the business at a reduced price in order to win the contract. t\ series of tmnsuctions o(,.'curn.'lJ, nsS(x;.ucd with the negotiation nnd establishment of the contracL These were conducted on primarily un :ldult-to-adu\t bmi!>. bhown as transaction I in Fig. 4.

2. After some time the supplier had become closely integrated inlo the buyer's product lines. The supplier considered that it was strong enough to ask for a price rise but it had to be based O'n some objective dala. This is shown as the surface ildult-to-adult trnnsaction 2 \'\1th an ulterior message of 'now that \l,'C (the supplier) hu\'e more power. you have to pay more' shown as transaction 3.

J. A negotiation process took place and the buyer agreed to most of the price irn."fCusc. On the surface this is the adult-to-adult transaction 4. Howe .... er. at a latcr time it invited thc supplier to take part in an

...•....•..•.... . .....•..•...... ......

.... . ... .. '

Suppli~

HR.4 You may be powerful, but ...

810WJ 00 IMecbE 2004

------- -- -- -

Appendix 3

APPLICATION OF TRANSACTIONAL ANALYSIS IN SUPPLY CHAIN NETWORK-I;); 51' internet auctioll for the supply of the parts. but the ulterior mcSSllge was 'we .... :ill get you later' and this is repr~entcd as: transaction 5.

The example demonstrates that the two compunks miC

their perceived power to guin ad\>antagc. The game playing th..1t was taking place was overall damaging. to iong-tcnn relationships but maximized the benefit in the short k-rm. The only solution Sl.>Cltlcd to expose the games and to encourage the two parties to act in a more illterdependent style.

.; D1SCUSSIOS

TA provides a very valuable tool for displaying the infonnation transti."f between p."l.rtncrs in the J.upply chain. It can represent the ulterior messages at the same time as the psychologic~d message and hence provide a much richer picture about the transactions than conventional inlonnation modelling tools. In this rest.'nrch the conccpt of games bus been used. The games, a .. dc\'clopcd in TA. are repeating patterns of transactions that occur between supply chain partners. TA was applied to organizations by Berne himself with tbe concepts of character, etiquette and tcchnu..'al culture matching to the child, parent and adult states. Ilowcvcr, g.ames in TA are generally carried out at an unconscious level and relate to learnt patterns of behaviour and 10 rc-enforce beliefs about the self. Between organizations the games are often more conscious and planned actions corresponding to unspoken transaction strategies. Rather than call these games it may be better to caU these detibt..'futc stmtcgic manOCUYTes.

The lnformation modelling capability of TA provides a much 'richer' picture about what is being ycrootly and n on-verbally communicated than many other information modelling tools. It is also possihle to identify tmnsactions inside the organization that tn.1tch l~ parental judgc~ ments, the logic..'lI adult and the emotional child. Onc difficulty in using TA is the interpretation of which part of the ego ~1utc the mcssagc$ are coming from. Toa c\m~ siderabic e.\tcnt tlx! theoretical base of 'fA does provide guidance about recognizing whether it is a parent-toadult transaction or an adult· to-adult transaction. etc .. and it was judged that, as organizational practitioners gained morccxpericnce, it would bccOO1C easier toidcntify dearly the patterns oftmnsactioll. From the field work in organization<; it does seem likely that thcre are only a limited numlx..-r of games that occur in supply-(.ilain intcractions There woukl be considerable value !fthis could be verified and to determine what these patterns arc. Jt would uLw he worthwhile to dctennine whether th:sc organizalion games match the Beme games. An as!>'Umplion of this research is that org.'"Inizalions can be modelled in a rather similar way to the individual in Ihal there are parentn!. child-like nnd adult trall.';uctions. \\llether you

205

identify the org.'llllzalion ill thc same way u.~ the individual or not it was demly observed in thi,> n..""iI:arch that tht.7C wt.'re parental-type tmnsat1ion:;, child--likc transactions and ndult-like transactions regularly taking place within anyone organi1..rl tion.

An important question is. l)nre gamt.. .... like behaviour i .. identified, wh.at Clm be done about these rather ncgaln.-e game-like patterns. It is not cven obvious thnt any company would actuaJlychoose to be up front and toeliminnte these ganlt::l particularJyifit is gaining somcstrntegic advantage and power (rom them, AU the parties in the transactions ha\'e to s(x these games as being negnti\·e before any conccrh."d action can take place to eliminate the g<lmc-like behaviour; then the tht.'Tl.lp:utie methods of TA would be appropriate. Being aware flf the game and having: a deliberate strategy 10 interrupt the pattern of transactions once idcntiti~ would cnd the games. Also using govcrnance mt.-chanisms similar to tho:.c tictlncd by Sandy Jap to control the incidence of opportunistic behaviour could significuntly reduce Ihe likelihood of games. Finally, the rt.-search has sho\.\TI the importance of powcr in that the 1I10re powerful memlx.'r generally sets the rules and controls the game-likc hchaviour. To eliminate games tire use of power must be used wisely not to overwhcbn the other in the transaction!!. Much of the transaction pattems appear to be:l mc..1.1tS of :lcquiring power in the transaction process. primarily to leverage the maxiw mum value for the organization. Although by far the majority of the trans::tctions observed were adult to adult, the incidence of game-like behaviour increast.>d in prohk'1l1 situations. Where onc party wanted to ensure that it did not suffer loss or alternatively wanted to gain advantage, gaming bc-came ob\'ious.

Now the three questions raised in st.'Ction 3 arc considered,

Are transaCfwns between individl.lat.~ ,~fr()ngly injltlefucd hy the sifualianai context (Dui rhe PI"JIl'U relaIiOl1-~ in tJw orgulI;;;atiolls?

From the case studies the answer '""'ould appe..'lf to be ·ycs·. Where a strong situational strength MS been idclltilioo, thell the transactlons ha\'C primarily bCt."'tl at the adult-u>-adult kvcl. However. where the situational strength is weak. then g.'1ming becomcs more 3\'uilab1e .....1th the dominant partner instigating. pan:nt-to-childtype transactions. Interestingly. the longer· term 'ulterior' transactions were primarily instigated by the weaker partner to gain longer-term advantage.

Where tlU' maJlipulatitm l!.f pow(!J" ill Ihe vrganizutiotl is realize,1 as ganu.'J, j,f TA a wJlid r"pre,k'/lttllitm (!flhese games?

Certainly. in the case studie .. ilwestigated, it provides a very useful shortwhand demonstration of the transactions taking place. It adds. a newdimcll!>lolllothc unders.tand· ing of tmnsaetions between organizations i.;nce it

f'ro(;. bin Mecb. Enr.n VaL 2lS Put B; 1. En;m«ring MannW:lnre

Appendix 3

'". S DANI, C J BACKHOUSE AND N D BURNS

considers more that just information flows. It shows the rclati\'C strengths :md weaknesses of me panncrs within a set oflransactions. enabling partners to identify problem issues which would not be so apparent ,,;thout the TA methodology.

lfrlw game.'f arise from the irnlMtlual or the orgcUlcation. is ,lsiof (.'fmlingelll rqum the .tlflmgrh of 'hi' .fillhllion?

From the case studies investigated. so far vcry little evidence was found that individuals instigated games on their own personal account. It i:'l true that games were: initiated by individuals but in all cases this was done to the supposed benefit of the cmplo)ing company. SignifIcant loyally to the company was seen in many cases. Ifowevcr. where games were played, it was aimed primarily at short-tenn ~nefit for the individuals' company and not for long-tenn bo.::ncfit of the partnership.

5 COl'o"CI.lJSIOi'o"

In conclusion. the present authors arc nfthe opinion that significant insight and benefit can be developed by modelling supply chain intL'f3ctions using TA and have been impressed by the diagnostic capabilitics or TA and its capability as an information modelling tool. As supply chains become incrcasingly Ic!l." and !l.gi1e, their overall perrormance becomes incn:asingly dependent on maint:lining mutual beneficial power relationships. The holnnic concept of supply chains can only be established through co-operation, and co-operation is only ensured by understanding. power relationships. TA provides a means for this undcrslunding and hencc relationship management.

ACKt'oiOWI.EI>GK\IEi\:T

The nuthors would like gmtefully to acknowledge the support that the Engineering and Physical Sciences Research Council, UK. h!l.S extcnded towards them for this work.

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Appendix 4

Appendix 4

Author's Publications

Dani, S., Backhouse, C.J. and Burns, N.D. (2004) "Application of Transactional Analysis in

Supply Chain Networks: A Potential Holonic Mediating Tool" , Proceedings of the Institution

of Mechanical Engineers. Part B: Journal of Engineering Manufacture, 218(B5) , May, pp

571-580, ISSN 0954-4054.

Dani, S., Backhouse, C.J. and Burns, N.D. (2005) "Buyer- Supplier Behaviour in Electronic

reverse Auctions: A Relationships Perspective", International Journal of Services and

Operations Management, Vo!. I, No. 1, pp 22-34

Dani, S. and Burns, N.D. (2001), "Logistics Research Network Conference" ,Proceedings of

the Logistics Research Network 6th Annual Conference , Heriot-Watt University, 13th

September, pp 111-117, ISBN 1-870214-92-7.

Dani, S. and Burns, N.D. (2001), "Developing a Framework Based on a Psychological

Perspective for Studying Buyer-Supplier Relationships" , Proceedings of SPJE Vol 4566,

"Internet Based Enterprise Integration & Management", Paper 4566-04 , Boston, USA,

October.

Dani, S., Burns, N.D. and Backhouse, C.J. (2002), "Modeling Voice and Exit Strategies

within Industrial Network Relationships" , Proceedings of the 2002 IEEE International

Engineering Management Conference, Cambridge, UK, 18th August, pp 264-269, ISBN 0-

7803-7385-5 .

Dani, S., Burns, N.D. and Backhouse, C.J. (2003), "Human Aspects of Supply Chain

Optimization" ,IEEE International Engineering Management Conference, New York, USA,

2nd November, pp 350-353, ISBN 0-7803-8151-3 .

Dani, S. and Burns, N.D. (2001), "Supply Chain Relationships" , Proceedings of the UK

Symposium on Supply Chain Alignment, Liverpool, UK, July 2001, pp 84-100.

207